82890 Economy Profile: Lao PDR Doing Business 2014 Lao PDR 2 © 2013 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org All rights reserved. 1 2 3 4 15 14 13 12 A copublication of The World Bank and the International Finance Corporation. This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 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Cover design: The Word Express Doing Business 2014 Lao PDR 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 23 Getting electricity ....................................................................................................................... 33 Registering property .................................................................................................................. 41 Getting credit .............................................................................................................................. 49 Protecting investors ................................................................................................................... 56 Paying taxes ................................................................................................................................ 65 Trading across borders .............................................................................................................. 72 Enforcing contracts .................................................................................................................... 80 Resolving insolvency .................................................................................................................. 90 Employing workers .................................................................................................................... 93 Data notes ................................................................................................................................. 100 Resources on the Doing Business website ............................................................................ 106 Doing Business 2014 Lao PDR 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is the paying taxes indicators, which cover the period for a local entrepreneur to open and run a small to January–December 2012). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 11 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, trading across borders and getting electricity), the getting credit, protecting investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and employing workers. macroeconomic conditions or the underlying strength In a series of annual reports Doing Business presents of institutions—are not directly studied by Doing quantitative indicators on business regulations and the Business. The indicators refer to a specific type of protection of property rights that can be compared business, generally a local limited liability company across 189 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 47 economies in Sub- standard assumptions are used in the data collection, Saharan Africa, 33 in Latin America and the Caribbean, comparisons and benchmarks are valid across 25 in East Asia and the Pacific, 25 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 20 in the Middle East and North obstacles to doing business; they also help identify the Africa and 8 in South Asia, as well as 31 OECD high- source of those obstacles, supporting policy makers in income economies. The indicators are used to analyze designing regulatory reform. economic outcomes and identify what reforms have More information is available in the full report. Doing worked, where and why. Business 2014 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and presents indicators for Lao PDR. To allow useful comparison, it business regulatory reforms. The data, along with also provides data for other selected economies information on ordering Doing Business 2014, are (comparator economies) for each indicator. The data in available on the Doing Business website at this report are current as of June 1, 2013 (except for http://www.doingbusiness.org. Doing Business 2014 Lao PDR 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: East Asia & Pacific business based on indicator sets that measure and benchmark regulations applying to domestic small to Income category: Lower middle income medium-size businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of Population: 6,645,827 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 1,260 percentile rankings on each of the 10 topics included in the index in Doing Business 2014: starting a business, DB2014 rank: 159 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2013 rank: 163* investors, paying taxes, trading across borders, Change in rank: 4 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the DB 2014 DTF: 49.84 percentile rankings on its component indicators (see the data notes for more details). The employing workers DB 2013 DTF: 49.21 indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented Change in DTF: 0.64 in this year’s economy profile. The aggregate ranking on the ease of doing business * DB2013 ranking shown is not last year’s published benchmarks each economy’s performance on the ranking but a comparable ranking for DB2013 that indicators against that of all other economies in the captures the effects of such factors as data Doing Business sample (figure 1.1). While this ranking corrections and the addition of 4 economies (Libya, tells much about the business environment in an Myanmar, San Marino and South Sudan) to the economy, it does not tell the whole story. The ranking on sample this year. See the data notes for sources and the ease of doing business, and the underlying definitions. indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2014 Lao PDR 6 THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2014 Lao PDR 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 Lao PDR and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2014 Lao PDR 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Lao PDR ranks on Doing Business topics Source: Doing Business database. Doing Business 2014 Lao PDR 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier tells only part of the story, so do changes in that ranking. measure. This measure shows how far on average an Yearly movements in rankings can provide some indication economy is from the best performance achieved by any of changes in an economy’s regulatory environment for economy on each Doing Business indicator since 2005, firms, but they are always relative. except for the getting electricity indicators, which were introduced in 2009. Moreover, year-to-year changes in the overall rankings do not reflect how the business regulatory environment in an Comparing the measure for an economy at 2 points in economy has changed over time—or how it has changed time allows users to assess how much the economy’s in different areas. To aid in assessing such changes, regulatory environment as measured by Doing Business has changed over time—how far it has moved toward (or away from) the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.4). Figure 1.4 How far has Lao PDR come in the areas measured by Doing Business? Note: The distance to frontier measure shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2005, except for the getting electricity indicators, which were introduced in 2009. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). The overall distance to frontier is the average of the distance to frontier in the first 9 indicator sets shown in the figure and does not include getting electricity. Data on the overall distance to frontier including getting electricity is available at http://www.doingbusiness.org/data/distance-to-frontier. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2014 Lao PDR 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 Lao PDR Best performer globally Cambodia DB2014 Indonesia DB2014 Malaysia DB2014 Thailand DB2014 Lao PDR DB2014 Lao PDR DB2013 Vietnam DB2014 Indicator China DB2014 DB2014 Starting a Business 85 82 184 158 175 16 91 109 New Zealand (1) (rank) Procedures (number) 6 6 11 13 10 3 4 10 New Zealand (1)* Time (days) 92.0 92.0 104.0 33.0 48.0 6.0 27.5 34.0 New Zealand (0.5) Cost (% of income per 6.7 7.1 150.6 2.0 20.5 7.6 6.7 7.7 Slovenia (0.0) capita) Paid-in Min. Capital (% 0.0 0.0 27.5 78.2 38.5 0.0 0.0 0.0 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 96 92 161 185 88 43 14 29 China (1) (rank) Hong Kong SAR, Procedures (number) 23 23 21 25 13 15 8 11 China (6) Time (days) 108.0 108.0 652.0 270.0 158.0 130.0 157.0 114.0 Singapore (26.0) Doing Business 2014 Lao PDR 11 Best performer globally Cambodia DB2014 Indonesia DB2014 Malaysia DB2014 Thailand DB2014 Lao PDR DB2014 Lao PDR DB2013 Vietnam DB2014 Indicator China DB2014 DB2014 Cost (% of income per 45.8 48.6 35.7 344.7 87.2 14.7 8.3 56.3 Qatar (1.1) capita) Getting Electricity 140 137 134 119 121 21 12 156 Iceland (1) (rank) Procedures (number) 5 5 4 5 6 5 4 6 10 Economies (3)* Time (days) 134 134 168 145 101 32 35 115 Germany (17) Cost (% of income per 1,913.0 2,130.5 2,636.1 499.2 370.6 49.1 67.3 1,726.4 Japan (0.0) capita) Registering Property 76 74 118 48 101 35 29 51 Georgia (1) (rank) Procedures (number) 5 5 7 4 6 5 2 4 4 Economies (1)* Time (days) 98.0 98.0 56.0 29.0 22.0 14.0 2.0 57.0 New Zealand (1.0)* Cost (% of property 1.1 1.1 4.4 3.6 10.9 3.3 6.3 0.6 5 Economies (0.0)* value) Getting Credit (rank) 159 154 42 73 86 1 73 42 Malaysia (1)* Strength of legal rights 4 4 8 5 5 10 5 8 10 Economies (10)* index (0-10) Depth of credit 2 2 4 5 4 6 5 4 31 Economies (6)* information index (0-6) Public registry coverage 2.4 2.5 0.0 30.2 41.2 52.9 0.0 39.1 Portugal (100.0)* (% of adults) Private bureau 0.0 0.0 21.1 0.0 0.0 77.2 49.2 0.0 22 Economies (100.0)* coverage (% of adults) Protecting Investors 187 187 80 98 52 4 12 157 New Zealand (1) (rank) Extent of disclosure 2 2 5 10 10 10 10 7 10 Economies (10)* Doing Business 2014 Lao PDR 12 Best performer globally Cambodia DB2014 Indonesia DB2014 Malaysia DB2014 Thailand DB2014 Lao PDR DB2014 Lao PDR DB2013 Vietnam DB2014 Indicator China DB2014 DB2014 index (0-10) Extent of director 1 1 10 1 5 9 7 1 Cambodia (10) liability index (0-10) Ease of shareholder 2 2 1 4 3 7 6 2 3 Economies (10)* suits index (0-10) Strength of investor 1.7 1.7 5.3 5.0 6.0 8.7 7.7 3.3 New Zealand (9.7) protection index (0-10) United Arab Emirates Paying Taxes (rank) 119 131 65 120 137 36 70 149 (1) Payments (number per Hong Kong SAR, 34 34 40 7 52 13 22 32 year) China (3)* United Arab Emirates Time (hours per year) 362 362 173 318 259 133 264 872 (12) Trading Across Borders 161 160 114 74 54 5 24 65 Singapore (1) (rank) Documents to export 10 10 8 8 4 4 5 5 Ireland (2)* (number) Time to export (days) 23 25 22 21 17 11 14 21 5 Economies (6)* Cost to export (US$ per 1,950 2,140 795 620 615 450 595 610 Malaysia (450) container) Documents to import 10 10 9 5 8 4 5 8 Ireland (2)* (number) Time to import (days) 26 26 24 24 23 8 13 21 Singapore (4) Cost to import (US$ per 1,910 2,125 930 615 660 485 760 600 Singapore (440) container) Enforcing Contracts 104 104 162 19 147 30 22 46 Luxembourg (1) (rank) Doing Business 2014 Lao PDR 13 Best performer globally Cambodia DB2014 Indonesia DB2014 Malaysia DB2014 Thailand DB2014 Lao PDR DB2014 Lao PDR DB2013 Vietnam DB2014 Indicator China DB2014 DB2014 Time (days) 443 443 483 406 498 425 440 400 Singapore (150) Cost (% of claim) 31.6 31.6 103.4 11.1 139.4 27.5 15.0 29.0 Bhutan (0.1) Procedures (number) 42 42 44 37 40 29 36 36 Singapore (21)* Resolving Insolvency 189 189 163 78 144 42 58 149 Japan (1) (rank) no no Time (years) 6.0 1.7 4.5 1.5 2.7 5.0 Ireland (0.4) practice practice no no Cost (% of estate) 28 22 18 10 36 15 Norway (1) practice practice Outcome (0 as no no piecemeal sale and 1 as 0 0 0 0 1 0 practice practice going concern) Recovery rate (cents on 0.0 0.0 8.2 36.0 17.9 48.9 42.2 16.2 Japan (92.8) the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2014 Lao PDR 14 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An additional benefit comes with limited liability Registration in the economy’s largest companies. These limit the financial liability of business city company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. Where registration, company seal) governments make registration easy, more entrepreneurs start businesses in the formal sector, Time required to complete each procedure creating more good jobs and generating more (calendar days) revenue for the government. Does not include time spent gathering What do the indicators cover? information Doing Business measures the ease of starting a Each procedure starts on a separate day (2 business in an economy by recording all procedures cannot start on the same day). procedures officially required or commonly done in Procedures that can be fully completed practice by an entrepreneur to start up and online are an exception to this rule. formally operate an industrial or commercial Procedure completed once final document is business—as well as the time and cost required to received complete these procedures. It also records the paid-in minimum capital that companies must No prior contact with officials deposit before registration (or within 3 months). Cost required to complete each procedure The ranking on the ease of starting a business is (% of income per capita) the simple average of the percentile rankings on the 4 component indicators: procedures, time, cost Official costs only, no bribes and paid-in minimum capital requirement. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business:  Has a start-up capital of 10 times income per  Is a limited liability company, located in the capita. largest business city and is 100% domestically  Has a turnover of at least 100 times income per owned. capita.  Has between 10 and 50 employees.  Does not qualify for any special benefits.  Conducts general commercial or industrial  Does not own real estate. activities. Doing Business 2014 Lao PDR 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Lao PDR? days, costs 6.7% of income per capita and requires According to data collected by Doing Business, starting paid-in minimum capital of 0.0% of income per capita a business there requires 6 procedures, takes 92.0 (figure 2.1). Figure 2.1 What it takes to start a business in Lao PDR Paid-in minimum capital (% of income per capita): 0.0 Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Lao PDR 16 STARTING A BUSINESS Globally, Lao PDR stands at 85 in the ranking of 189 regional average ranking provide other useful economies on the ease of starting a business (figure information for assessing how easy it is for an 2.2). The rankings for comparator economies and the entrepreneur in Lao PDR to start a business. Figure 2.2 How Lao PDR and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2014 Lao PDR 17 STARTING A BUSINESS What are the changes over time? The benchmarks provided by the economies that over 2.3) can help show what is possible in making it easier time have had the best performance regionally or to start a business. And changes in regional averages globally on the procedures, time, cost or paid-in can show where Lao PDR is keeping up—and where it minimum capital required to start a business (figure is falling behind. Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2014 Lao PDR 18 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: Ninety economies globally have no paid-in minimum capital requirement. DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Lao PDR 19 STARTING A BUSINESS Economies around the world have taken steps making greater firm satisfaction and savings and more it easier to start a business—streamlining procedures registered businesses, financial resources and job by setting up a one-stop shop, making procedures opportunities. simpler or faster by introducing technology and What business registration reforms has Doing Business reducing or eliminating minimum capital requirements. recorded in Lao PDR (table 2.1)? Many have undertaken business registration reforms in stages—and they often are part of a larger regulatory reform program. Among the benefits have been Table 2.1 How has Lao PDR made starting a business easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. Lao PDR made starting a business easier by allowing DB2013 entrepreneurs to apply for tax registration at the time of incorporation. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Lao PDR 20 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Lao PDR is a set of specific procedures —the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new City: Vientiane firm. These are identified by Doing Business through collaboration with relevant local Legal Form: Private Limited Liability Company professionals and the study of laws, regulations and Paid in Minimum Capital Requirement: None publicly available information on business entry in that economy. Following is a detailed summary of Start-up Capital: 10 times GNI per capita those procedures, along with the associated time and cost. These procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Summary of procedures for starting a business in Lao PDR—and the time and cost Time to No. Procedure Cost to complete complete Apply for a Name Reservation Certificate It is required to obtain a Name Reservation Certificate from the Enterprise Registry Office ("ERO") within the Ministry of Industry and Commerce ("MOIC"). All companies are required to obtain a Name Reservation Certificate before applying to the ERO for an Enterprise 1 Registration Certificate. A completed Application for Reservation of 1 day LAK 10,000 Company Name, listing three potential names for the company to be established, and a signed Contract of Incorporation (if there are multiple shareholders) in the format approved by the MOIC must be submitted to the ERO in order to obtain a Name Reservation Certificate. Apply for an Enterprise Registration Certificate and apply for tax registration certificate Founders shall complete the application form for enterprise registration in the MOIC standard application form attaching the following required documents: (i) 3 copies of the Contract of Incorporation, (ii) 3 original copies of the signed Articles of Association in the MOIC standard 1 week for template, (iii) 3 copies of the resolution of founders of the company, (iv) compamy See procedure 2 3 copies of the Power of Attorney in the MOIC standard template (if registration and 2 details another person is assigned to submit the application), (v) 3 copies of ID weeks for tax card/passport of founders or business licenses for entities, (vi) 6 photos registration size 3cmx4cm of the nominated Managing Director. Once the company obtains the Enterprise Registration Certificate, it shall thereafter register its Articles of Association with the State Assets Management Department (SAMD), Ministry of Finance. For registration the following are required: letter request, the original signed Articles of Doing Business 2014 Lao PDR 21 Time to No. Procedure Cost to complete complete Association, and copy of ERC. Enterprises operating in the Lao PDR are subject to direct and indirect taxes. Direct taxes are profit tax, income tax and fees; and indirect taxes are business turnover tax, value-added tax and use tax. Value added tax replaced the business turnover tax. A Tax Registration Certificate is neither issued nor required to be renewed annually. The fee for the Tax Registration Certificate depends on the annual income of the Company. The fee for a company with an annual business turnover of US $113,000 is LAK 983,018,852. The application fee is LAK 25,000. The company shall complete the application for the Tax Identification Number Certificate and enterprise registration in the standard form attach with the required documents and submitted at the Tax Authority, who will consider the application and issue the Tax Identification Number Certificate. The application for tax certificate can be submitted at the same time as the company registration (at the One-stop shop). Cost details: LAK 10,000 (Incorporation form) + LAK 70,000 (Application form) + LAK 300,000 (Registration service fee) + LAK 25,000 (Registration form for taxes) + LAK 100,000 (Tax certificate) Apply for an Operating License from relevant Ministry Upon obtaining the Enterprise Registration Certificate, Tax Identification Number Certificate, and enterprise registration number with the Tax Authority, the company shall complete the application form for factory 3 operation with the DICV standard form and required documents. These 2-3 weeks LAK 50,000 are submitted at the DICV, which will consider the application and require inspection of the location of the factory before issuing the license. * Obtain Approval of Content on the Company Signage and the Company Signage Building Permit The company must obtain content approval and a building permit. For the content approval application, the company must complete the application form in MICT standard form and provide the following: (i) 5 days the name of the company in Lao, enterprise code provided under the (simultaneous with 4 enterprise registration certificate, office location and contact detail of LAK 10,000 previous the company; (ii) the color in red for the letters, and yellow for the procedure) background (these colors applied to domestic companies); and (ii) the size shall not exceed 2mx4m. For the building permit, the company must complete the application form and attach the signage layout indicating the location and size, and copy of the company's licenses. Doing Business 2014 Lao PDR 22 Time to No. Procedure Cost to complete complete Carve a company seal The application form for making the company seal is LAK 10,000. The LAK 120,000 for Lao cost for the certificate authorizing the design in LAK 60,000. The language and LAK 5 carving of a seal in Lao language only is LAK 50,000 (the carving of a 45 days 123,000 for Lao and seal in Lao and in another language is LAK 53,000). The total time takes other languages around 45 days. Register the workers for social security The application form to register workers for social security insurance is available at the agency in charge of registration. Employees and employers must participate in the compulsory social security regime. They may not enter into mutual agreements to avoid participation in the social security regime. The social security regime for company 6 employees is established on the principle of state-guaranteed 7 days no charge insurance. Contributions to the social security regime are paid by both the employers and employees: 5.0% of gross salary is to be contributed for social security by the employer and another 4.5%, by the employee. The maximum ceiling for calculating these contributions is LAK 2, 00,000 (5% and 4.5% of LAK 2,000,000). * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Lao PDR 23 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse time and money, many builders opt out. They may (number) pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Submitting all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, Doing Business records the procedures, time and sewerage and a land telephone line cost for a business in the construction industry to Registering the warehouse after its obtain all the necessary approvals to build a completion (if required for use as collateral or warehouse in the economy’s largest business city, for transfer of the warehouse) connect it to basic utilities and register the Time required to complete each procedure property so that it can be used as collateral or (calendar days) transferred to another entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day. percentile rankings on its component indicators: Procedures that can be fully completed online procedures, time and cost. are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final Doing Business uses several assumptions about the document is received business and the warehouse, including the utility connections. No prior contact with officials The business: Cost required to complete each procedure (% of income per capita)  Is a limited liability company operating in Official costs only, no bribes the construction business and located in the largest business city.  Will be connected to water, sewerage (sewage system, septic tank or their  Is domestically owned and operated. equivalent) and a fixed telephone line. The  Has 60 builders and other employees. connection to each utility network will be 10 The warehouse: meters (32 feet, 10 inches) long.  Is a new construction (there was no  Will be used for general storage, such as of previous construction on the land). books or stationery (not for goods requiring special conditions).  Has complete architectural and technical plans prepared by a licensed architect or  Will take 30 weeks to construct (excluding all engineer. delays due to administrative and regulatory requirements). Doing Business 2014 Lao PDR 24 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to permits there requires 23 procedures, takes 108.0 days build a warehouse in Lao PDR? According to data and costs 45.8% of income per capita (figure 3.1). collected by Doing Business, dealing with construction Figure 3.1 What it takes to comply with formalities to build a warehouse in Lao PDR Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Lao PDR 25 DEALING WITH CONSTRUCTION PERMITS Globally, Lao PDR stands at 96 in the ranking of 189 other useful information for assessing how easy it is for economies on the ease of dealing with construction an entrepreneur in Lao PDR to legally build a permits (figure 3.2). The rankings for comparator warehouse. economies and the regional average ranking provide Figure 3.2 How Lao PDR and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2014 Lao PDR 26 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to deal with time have had the best performance regionally or construction permits. And changes in regional globally on the procedures, time or cost required to averages can show where Lao PDR is keeping up—and deal with construction permits (figure 3.3) help show where it is falling behind. Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2014 Lao PDR 27 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Lao PDR 28 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in Lao PDR (table 3.1)? Construction is one of them. In an effort to ensure Table 3.1 How has Lao PDR made dealing with construction permits easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Lao PDR 29 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Lao PDR are BUILDING A WAREHOUSE based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through City : Vientiane information collected from experts in construction licensing, including architects, civil engineers, Estimated construction lawyers, construction firms, utility LAK 1,622,396,115 Warehouse Value : service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and that apply to a company and structure matching cost, are summarized below. the standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for dealing with construction permits in Lao PDR —and the time and cost Time to No. Procedure Cost to complete complete Purchase the application forms to a building permit BuildCo should purchase the application forms to apply for a building 1 permit from the district construction division. Vientiane Prefecture is 1 day LAK 20,000 divided into four districts, which are further subdivided into villages. Request and obtain residence certificate from Village Chief BuildCo must obtain a residence certificate certifying that the applicant 1 day LAK 40,000 2 (the company's manager) has a permanent address. Request and obtain map describing the location of the construction site, and map describing the technical characteristics of the ground BuildCo must obtain from the district land management authority a map (on a scale from 1:5,000 to 1:20,000) delineating the location of 14 days LAK 60,000 3 the construction site. In addition, the company must obtain from the same authority a map (on a scale from 1:5,000 to 1:20,000) delineating the technical characteristics of the plot: surrounding streets and inner ways, existing buildings, walls, electricity poles, and the like. Submit building permit application to the district construction division 4 1 day LAK 50,000 BuildCo must submit the application for a building permit, along with a copy of the land title and documents described above (four copies of each). The district construction division inspects the property. If the Doing Business 2014 Lao PDR 30 Time to No. Procedure Cost to complete complete inspectors approve the application, the head of the district will sign the approval. For buildings larger than 200 sq. m., the district chief sends a letter to the prefect of Vientiane Prefecture for final approval; the district construction division notifies the applicant that the letter has been forwarded to the Prefecture. Receive pre-approval inspection from the district construction division The district construction division inspects the property. If the inspectors approve the application, the head of the district signs the approval. For 5 buildings larger than 200 sq. m., the district chief sends a letter to the 1 day no charge Vientiane Prefecture’s Office of Building and Urban Planning for final approval; the district construction division notifies the applicant that the letter has been forwarded to the Prefecture. Receive pre-approval inspection from the Vientiane Prefecture The inspectors verify that the construction plan complies with building 1 day no charge 6 regulations. Obtain building permit from Vientiane Prefecture After the plan is approved, the Office of Building and Urban Planning of Vientiane Capital contacts the applicant to pick up the permit. If the 30 days LAK 710,300 7 Prefecture does not contact the applicant within 30 days, the plan is deemed approved. Receive inspection from committee for management of construction - I The inspection committee may inspect the construction site several times before, during, and after construction. The committee may conduct any of the following inspections: pre-construction; excavation 1 day no charge 8 work; foundations work; concrete work; steel work for slabs; frame; damp-proof course; drainage; timber scaffolding; electrical; plumbing (water); environmental; sanitary (sewage); surroundings of the building; structure; final inspection. Receive inspection from committee for management of construction - II 9 1 day no charge Receive inspection from committee for management of construction - III 10 1 day no charge Doing Business 2014 Lao PDR 31 Time to No. Procedure Cost to complete complete Receive inspection from committee for management of construction - IV 11 1 day no charge Receive inspection from committee for management of construction - V 12 1 day no charge Receive inspection from committee for management of construction - VI 13 1 day no charge Receive inspection from committee for management of construction - VII 14 1 day no charge Receive inspection from committee for management of construction - VIII 15 1 day no charge Receive inspection from committee for management of construction - IX 16 1 day no charge Receive inspection from committee for management of construction - X 17 1 day no charge Receive inspection from committee for management of construction - XI 18 1 day no charge Doing Business 2014 Lao PDR 32 Time to No. Procedure Cost to complete complete Receive inspection from committee for management of construction - XII 19 1 day no charge Request and receive final inspection from committee for management of construction After construction is finished, the project owner or building owner must request in writing for the Construction Management Committee (CMC) to inspect the construction according to the issued building permit. If the construction complies with construction regulations, the Housing and Urban Planning Department, in coordination with State Asset and 1 day no charge 20 Housing Department, officially issues a correct construction certificate (a correct construction certificate means a certificate issued by the CMC to certify that the construction complies with the regulation). Regulation No.1512 (dated September 28, 1991) has been replaced by Decision No. 7681 (dated June 29, 2005). Obtain certificate of completion of building works 21 20 days no charge * Request and receive connection to water and sewage services To obtain a water and sewerage connection to the land where the 22 building will be constructed, the applicant must enclose the building 45 days LAK 3,000,000 permit or a correct construction certificate with the application. * Request and receive connection to telephone To obtain a telephone connection to the land where the building will 23 be constructed, the applicant must enclose the building permit or a 30 days LAK 900,000 correct construction certificate with the application. * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Lao PDR 33 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for Completing all required notifications and a local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to Obtaining external installation works and complete them. These procedures include possibly purchasing material for these works applications and contracts with electricity utilities, Concluding any necessary supply contract and clearances from other agencies and the external obtaining final supply and final connection works. The ranking on the ease of getting electricity is the simple average of Time required to complete each procedure the percentile rankings on its component (calendar days) indicators: procedures, time and cost. To make the Is at least 1 calendar day data comparable across economies, several assumptions are used. Each procedure starts on a separate day The warehouse: Does not include time spent gathering information  Is located in the economy’s largest business city, in an area where other Reflects the time spent in practice, with little warehouses are located. follow-up and no prior contact with officials  Is not in a special economic zone where Cost required to complete each procedure the connection would be eligible for (% of income per capita) subsidization or faster service. Official costs only, no bribes  Has road access. The connection works Excludes value added tax involve the crossing of a road or roads but are carried out on public land.  Is to either the low-voltage or the medium-  Is a new construction being connected to voltage distribution network and either overhead electricity for the first time. or underground, whichever is more common in the economy and area where the warehouse is  Has 2 stories, both above ground, with a located. The length of any connection in the total surface of about 1,300.6 square customer’s private domain is negligible. meters (14,000 square feet), and is built on a plot of 929 square meters (10,000 square  Requires crossing of a 10-meter road but all the feet). works are carried out in a public land, so there is no crossing into other people's private property. The electricity connection:  Involves installing one electricity meter. The  Is 150 meters long and is a 3-phase, 4-wire Y, monthly electricity consumption will be 0.07 140-kilovolt-ampere (kVA) (subscribed gigawatt-hour (GWh). The internal electrical capacity) connection. wiring has been completed. Doing Business 2014 Lao PDR 34 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity procedures, takes 134 days and costs 1913.0% of connection in Lao PDR? According to data collected by income per capita (figure 4.1). Doing Business, getting electricity there requires 5 Figure 4.1 What it takes to obtain an electricity connection in Lao PDR Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Lao PDR 35 GETTING ELECTRICITY Globally, Lao PDR stands at 140 in the ranking of 189 regional average ranking provide another perspective economies on the ease of getting electricity (figure in assessing how easy it is for an entrepreneur in Lao 4.2). The rankings for comparator economies and the PDR to connect a warehouse to electricity. Figure 4.2 How Lao PDR and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2014 Lao PDR 36 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 Lao PDR Best performer in Best performer Indicator Lao PDR DB2014 Lao PDR DB2013 East Asia & Pacific globally DB2014 DB2014 Rank Hong Kong SAR, 140 137 Iceland (1) China (5) Procedures (number) 5 5 Timor-Leste* (3) 10 Economies* (3) Time (days) 134 134 Taiwan, China (24) Germany (17) Cost (% of income per Hong Kong SAR, capita) 1,913.0 2,130.5 Japan (0.0) China (1.5) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. * Two or more economies share the top ranking on this indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2014 Lao PDR 37 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 Lao technical standards, procurement practices and PDR (table 4.2)? internal wiring installations. In an effort to ensure Table 4.2 How has Lao PDR made getting electricity easier —or not? By Doing Business report year DB year Reform DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 Lao PDR 38 GETTING ELECTRICITY What are the details? The indicators reported here for Lao PDR are based on OBTAINING AN ELECTRICITY CONNECTION a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution City: Vientiane utility—identified by Doing Business. Data are collected from the distribution utility, then completed and Name of Utility: Elictricite du Laos verified by electricity regulatory agencies and independent professionals such as electrical engineers, The procedures are those that apply to a warehouse electrical contractors and construction companies. The and electricity connection matching the standard electricity distribution utility surveyed is the one assumptions used by Doing Business in collecting the serving the area (or areas) in which warehouses are data (see the section in this chapter on what the located. If there is a choice of distribution utilities, the indicators cover). The procedures, along with the one serving the largest number of customers is associated time and cost, are summarized below. selected. Summary of procedures for getting electricity in Lao PDR—and the time and cost Time to No. Procedure Cost to complete complete Submit application for an electricity connection to EDL and await an estimate of fees and technical specifications of the connection The application for an electricity connection can be submitted to EDL by the construction company or by the building owner (it is more common that the construction company submits the application). Usually the application is submitted in person with attached documents in hard copies. The following documents have to be attached (1) Application for a connection as a new user; (2) Load and in house wiring designs (3) Distribution panel design (4) Building location (5) in some cases other clearances. 1 EDL does not carry out an external inspection for the preparation of the 37 calendar days no charge technical specifications. EDL reviews the documents and responds with the following information: (1) the nearest substation or the point where the connection can be made (2) distance between the substation and the building. (3) recommendation of suitable transformers, a power transformer (PT) and a current transformer (CT) ,and ground resistance for the transformer. The utility obtains the excavation permit for the customer. It takes 7 days on average to get the excavation permit. Doing Business 2014 Lao PDR 39 Time to No. Procedure Cost to complete complete Await approval of the detailed technical design and installation plan and registration of the chief engineer at EDL The electrical contractor/construction company in charge of the external connection works prepares a detailed technical design of the external connection and an installation plan. When the electrical contractor/construction company submits the technical design to EDL for approval, registration documents for the chief engineer have to be submitted as well. The construction company must propose and assign someone to be the chief electrical engineer who is 2 responsible for designing and supervision of the project. The assignment 30 calendar days LAK 1,500,000.0 has to be approved by EDL. The registration of the chief electrical engineer is valid only for the proposed project. The construction company has to register a chief electrical engineer for every project it carries out. The approval of the technical design is granted together with the proposal of the the consumption fees so arrangements for the supply of electricity are completed at this stage as well. Await completion of the external connection works by an electrical contractor Once the electrical design is approved by EDL the electrical installation company can start external connection works. 3 60 calendar days USD 23,500.0 The meter can be installed during the final stage of the external connection works by the electrical contractor. Await registration of a meter at EDL The meter can be installed by an electrical contractor but it must be 4 bought and registered with EDL. The meter is registered when it is 1 calendar day LAK 2,500,000.0 bought at the utility. Obtain an external and internal inspections by EDL and electricity starts flowing After the external connection works are completed by the electrical contractor there is an external inspection by EDL. 7 calendar days LAK 1,000,000.0 5 EDL also inspects the internal wiring when all installation works are finished. During the inspection a representative of the construction company/electrical contractor has to be present. Doing Business 2014 Lao PDR 40 Time to No. Procedure Cost to complete complete After the electrical installation is approved, the electricity can be supplied instantly. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2014 Lao PDR 41 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being immovable property (number) accepted as collateral for loans—limiting access to Preregistration (for example, checking for liens, finance. notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration in the economy’s largest business Doing Business records the full sequence of city procedures necessary for a business to purchase property from another business and transfer the Postregistration (for example, filing title with the municipality) property title to the buyer’s name. The transaction is considered complete when it is opposable to Time required to complete each procedure third parties and when the buyer can use the (calendar days) property, use it as collateral for a bank loan or Does not include time spent gathering resell it. The ranking on the ease of registering information property is the simple average of the percentile rankings on its component indicators: procedures, Each procedure starts on a separate day. time and cost. Procedures that can be fully completed online are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final several assumptions about the parties to the document is received transaction, the property and the procedures are used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure (% of property value)  Are limited liability companies, 100% domestically and privately owned. Official costs only, no bribes  Are located in the economy’s largest No value added or capital gains taxes included business city. and no rezoning is required.  Have 50 employees each, all of whom are  Has no mortgages attached and has been nationals. under the same ownership for the past 10  Perform general commercial activities. years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story  Has a value of 50 times income per capita. warehouse of 929 square meters (10,000 The sale price equals the value. square feet). The warehouse is in good  Is registered in the land registry or cada- condition and complies with all safety stre, or both, and is free of title disputes. standards, building codes and legal requirements. There is no heating system. The  Is located in a periurban commercial zone, property will be transferred in its entirety. Doing Business 2014 Lao PDR 42 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in procedures, takes 98.0 days and costs 1.1% of the Lao PDR? According to data collected by Doing property value (figure 5.1). Business, registering property there requires 5 Figure 5.1 What it takes to register property in Lao PDR Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Lao PDR 43 REGISTERING PROPERTY Globally, Lao PDR stands at 76 in the ranking of 189 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Lao PDR to transfer property. Figure 5.2 How Lao PDR and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2014 Lao PDR 44 REGISTERING PROPERTY What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to register time have had the best performance regionally or property. And changes in regional averages can show globally on the procedures, time or cost required to where Lao PDR is keeping up—and where it is falling complete a property transfer (figure 5.3) help show behind. Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2014 Lao PDR 45 REGISTERING PROPERTY Cost (% of property value) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Lao PDR 46 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 Lao PDR (table 5.1)? Table 5.1 How has Lao PDR made registering property easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. Lao PDR made resgistering property faster by moving to a title DB2011 system. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Lao PDR 47 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property City: Vientiane lawyers, notaries and property registries. These procedures are those that apply to a transaction Property Value: LAK 521,484,465 matching the standard assumptions used by Doing Business in collecting the data (see the section in The procedures, along with the associated time and this chapter on what the indicators cover). cost, are summarized below. Summary of procedures for registering property in Lao PDR—and the time and cost Time to No. Procedure Cost to complete complete Obtain the Land Title Accuracy Certificate ("Certificate") The seller or buyer or their appointees submit the application form for verification of correctness of the land title which is signed by the village chief where the land is located to the District Natural Resources and Environment Office. Upon receipt the application form, the Vientiane Department of Natrual Resources and Environment will verify the LAK 2,000 for correctness of the land title compared with the Land Registry Book, Land application + LAK Map and other related documents. If it is correct, the Vientiane 2-5 days 50,000 for 1 Department of Natrual Resources and Environment will issue the issuance of the Certificate of Correctness of the land title. title The application forms for verification of correctness of the land title are submitted at the same time as the application for registration of the sale and purchase agreement and transfer of the property to the District Natural Resources and Envrionemt Office. Complete the LMA sale-purchase agreement form The authorized representatives of the seller-company and buyer- company must execute a sale and purchase agreement in a form LAK 15,000 - LAK 2 provided by the District Natural Resources and Environment Office, 2 days 20,000 which is signed by three witnesses and by the village chief where the land is located. Doing Business 2014 Lao PDR 48 Time to No. Procedure Cost to complete complete Notarize of sale-purchase agreement The Instruction No. 435/MoJ, dated November 11, 2011 on the Implementation of the Notary Law requires for the parties (or their duly authorised representatives) to be present at the Notary Office in order to have the sale-purchase agreement notarized. They submit the Certificate 3 days LAK 20,000 + LAK 3 of Correctness of Land Title to Notary Office along with the original sale- 5,000 per page purchase agreement. The signed sale and purchase agreement is certififed by the Notary Office to attest that land use rights have been appropriately transferred according to the agreement Registration of the sale-purchase agreement and issuance of the new Land Title LAK 135,000 (paid The notarized sale and purchase agreement is submitted to the District at the time of Natural Resources and Environment Office which will be registered at the submission) + LAK Vientiane Department of Natural Resources and Environment. The 15,000 (land title 4 Vientiane Department of Natural Resources and Environment will 30-60 days fee) + LAK 10,000 thereafter issue a new land title in the name of the Buyer and send to the (service fee) + 1% District Natural Resources and Environment Office. property value (registration fee) Give public notice of the transaction There must be publication of an information notice at the village and district offices, and in the media - art. 49 Land Law. The parties must wait up to 90 days LAK 40,000 5 for up to 90 days to continue with the registration process, as long as no objection is presented during that period. * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Lao PDR 49 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders’ rights to view a potential borrower’s Strength of legal rights index (0–10) financial history (positive or negative)—valuable Rights of borrowers and lenders through information to consider when assessing risk. And collateral laws they permit borrowers to establish a good credit Protection of secured creditors’ rights through history that will allow easier access to credit. Sound bankruptcy laws collateral laws enable businesses to use their assets, especially movable property, as security to generate Depth of credit information index (0–6) capital—while strong creditors’ rights have been Scope and accessibility of credit information associated with higher ratios of private sector credit distributed by public credit registries and to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit Private credit bureau coverage (% of adults) information index measures rules and practices Number of individuals and firms listed in affecting the coverage, scope and accessibility of largest private credit bureau as percentage of credit information available through a public credit adult population registry or a private credit bureau. The strength of legal rights index measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses case scenarios to determine the scope of the  Has up to 100 employees. secured transactions system, involving a secured  Is 100% domestically owned, as is the lender. borrower and a secured lender and examining legal The ranking on the ease of getting credit is based on restrictions on the use of movable collateral. These the percentile rankings on the sum of its component scenarios assume that the borrower: indicators: the depth of credit information index and  Is a private, incorporated, limited liability the strength of legal rights index. company.  Has its headquarters and only base of operations in the largest business city. Doing Business 2014 Lao PDR 50 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Lao PDR stands at 159 in the ranking of 189 collateral and bankruptcy laws in Lao PDR facilitate economies on the ease of getting credit (figure 6.1). access to credit? The economy has a score of 2 on the The rankings for comparator economies and the depth of credit information index and a score of 4 on regional average ranking provide other useful the strength of legal rights index (see the summary of information for assessing how well regulations and scoring at the end of this chapter for details). Higher institutions in Lao PDR support lending and borrowing. scores indicate more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Lao PDR and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2014 Lao PDR 51 GETTING CREDIT What are the changes over time? While the most recent Doing Business data reflect how institutions and regulations have been strengthened — well the credit information system and collateral and and where they have not (table 6.1). That can help bankruptcy laws in Lao PDR support lending and identify where the potential for improvement is borrowing today, data over time can help show where greatest. Table 6.1 The ease of getting credit in Lao PDR over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 DB2014 Rank .. .. .. .. .. .. .. .. 154 159 Strength of legal rights 3 3 4 4 4 4 4 4 4 4 index (0-10) Depth of credit 0 0 0 0 0 0 0 2 2 2 information index (0-6) Public registry coverage 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 2.5 2.4 (% of adults) Private bureau 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Lao PDR 52 GETTING CREDIT One way to put an economy’s score on the getting shows the number of economies with this score in credit indicators into context is to see where the 2013 as well as the regional average score. Figure 6.3 economy stands in the distribution of scores across shows the same thing for the depth of credit economies. Figure 6.2 highlights the score on the information index. strength of legal rights index for Lao PDR in 2013 and Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared— and lenders? and how widely? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2013 information index (0–6), 2013 Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Source: Doing Business database. Doing Business 2014 Lao PDR 53 GETTING CREDIT When economies strengthen the legal rights of lenders credit information, they can increase entrepreneurs’ and borrowers under collateral and bankruptcy laws, access to credit. What credit reforms has Doing and increase the scope, coverage and accessibility of Business recorded in Lao PDR (table 6.2)? Table 6.2 How has Lao PDR made getting credit easier —or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Lao PDR 54 GETTING CREDIT What are the details? The getting credit indicators reported here for Lao PDR The data on the legal rights of borrowers and lenders are based on detailed information collected in that are gathered through a survey of financial lawyers and economy. The data on credit information sharing are verified through analysis of laws and regulations as collected through a survey of a credit registry and/or well as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, credit information index, a score of 1 is assigned for a score of 1 is assigned for each of 8 aspects related to each of 6 features of the credit registry or credit legal rights in collateral law and 2 aspects in bureau (see summary of scoring below). bankruptcy law. Summary of scoring for the getting credit indicators in Lao PDR East Asia & Pacific OECD high income Indicator Lao PDR average average Strength of legal rights index (0-10) 4 7 7 Depth of credit information index (0-6) 2 4 5 Public registry coverage (% of adults) 2.4 35.6 42.9 Private bureau coverage (% of adults) 0.0 44.8 73.9 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Regional averages for the credit registry coverage exclude economies with no credit registry. Regional averages for the credit bureau coverage exclude economies with no credit bureau. Strength of legal rights index (0–10) Index score: 4 Can any business use movable assets as collateral while keeping possession of the assets; and Yes any financial institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of No movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of Yes its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically No to the products, proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation, that is unified geographically and by asset type, with an No electronic database indexed by debtor's names? Doing Business 2014 Lao PDR 55 Strength of legal rights index (0–10) Index score: 4 Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor No defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is No liquidated? Are secured creditors either not subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure, or does the law provide secured No creditors with grounds for relief from an automatic stay or/and sets a time limit to it? Does the law allow parties to agree in a collateral agreement that the lender may enforce its Yes security right out of court, at the time a security interest is created? Depth of credit information index (0–6) Credit bureau Credit registry Index score: 2 Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative data distributed? No Yes 1 Does the registry distribute credit information from retailers, trade creditors or utility companies as well as No No 0 financial institutions? Are more than 2 years of historical credit information No No 0 distributed? Is data on all loans below 1% of income per capita No No 0 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. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 0 8,248 Number of individuals 0 89,472 Source: Doing Business database. Doing Business 2014 Lao PDR 56 PROTECTING INVESTORS Protecting investors matters for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not protect minority shareholders, investors may be reluctant to provide funding to companies through Extent of disclosure index (0–10) the purchase of shares unless they become the Approval process for related-party controlling shareholders. Effective regulations define transactions related-party transactions precisely, promote clear Disclosure requirements in case of related- and efficient disclosure requirements, require party transactions shareholder participation in major decisions of the company and set detailed standards of accountability Extent of director liability index (0–10) for company insiders. Ability of minority shareholders to file a direct or derivative lawsuit What do the indicators cover? Ability of minority shareholders to hold Doing Business measures the strength of minority interested parties and members of the shareholder protections against directors’ use of approving body liable for prejudicial related- corporate assets for personal gain—or self-dealing. party transactions The indicators distinguish 3 dimensions of investor protections: transparency of related-party Available legal remedies (damages, repayment of profits, fines, imprisonment and rescission transactions (extent of disclosure index), liability for of the transaction) self-dealing (extent of director liability index) and minority shareholders’ access to evidence before and Ease of shareholder suits index (0–10) during trial (ease of shareholder suits index). The Access to internal corporate documents ranking on the strength of investor protection index is (directly or through a government inspector) the simple average of the percentile rankings on these 3 indices. To make the data comparable across Documents and information available during trial economies, a case study uses several assumptions about the business and the transaction. Strength of investor protection index (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of  Is a publicly traded corporation listed on the shareholder suits indices economy’s most important stock exchange (or at least a large private company with multiple shareholders). the company purchase used trucks from another company he owns.  Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of  The price is higher than the going price for used Buyer where permitted, even if this is not trucks, but the transaction goes forward. specifically required by law.  All required approvals are obtained, and all The transaction involves the following details: required disclosures made, though the transaction is prejudicial to Buyer.  Mr. James, a director and the majority shareholder of the company, proposes that  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2014 Lao PDR 57 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections against self- index (figure 7.1). While the indicator does not dealing in Lao PDR? The economy has a score of 1.7 measure all aspects related to the protection of on the strength of investor protection index, with a minority investors, a higher ranking does indicate that higher score indicating stronger protections (see the an economy’s regulations offer stronger investor summary of scoring at the end of this chapter for protections against self-dealing in the areas measured. details). Globally, Lao PDR stands at 187 in the ranking of 189 economies on the strength of investor protection Figure 7.1 How Lao PDR and comparator economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2014 Lao PDR 58 PROTECTING INVESTORS What are the changes over time? While the most recent Doing Business data reflect how ranking on the strength of investor protection index well regulations in Lao PDR protect minority investors over time shows whether the economy is slipping today, data over time show whether the protections behind other economies in investor protections—or have been strengthened (table 7.1). And the global surpassing them. Table 7.1 The strength of investor protections in Lao PDR over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 DB2014 Rank .. .. .. .. .. .. .. 187 187 Extent of disclosure 2 2 2 2 2 2 2 2 2 index (0-10) Extent of director 1 1 1 1 1 1 1 1 1 liability index (0-10) Ease of shareholder 2 2 2 2 2 2 2 2 2 suits index (0-10) Strength of investor protection index (0- 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Lao PDR 59 PROTECTING INVESTORS One way to put an economy’s scores on the protecting shows the number of economies with this score in investors indicators into context is to see where the 2013 as well as the regional average score. Figure 7.3 economy stands in the distribution of scores across applies to the extent of director liability index, and economies. Figure 7.2 highlights the score on the figure 7.4 to the ease of shareholder suits index. extent of disclosure index for Lao PDR in 2013 and Figure 7.2 How strong are disclosure requirements? Figure 7.3 How strong is the liability regime for directors? Number of economies with each score on the extent of Number of economies with each score on the extent of director liability index (0–10), 2013 disclosure index (0–10), 2013 Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2014 Lao PDR 60 PROTECTING INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Number of economies with each score on the ease of shareholder suits index (0–10), 2013 Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2014 Lao PDR 61 PROTECTING INVESTORS The scores recorded over time for Lao PDR on the changes over time in the regional average score on strength of investor protection index may also be this index. revealing (figure 7.5). Equally interesting may be the Figure 7.5 Have investor protections become stronger over time? Strength of investor protection index (0–10) Note: The higher the score, the stronger the protections. Source: Doing Business database. Doing Business 2014 Lao PDR 62 PROTECTING INVESTORS Economies with the strongest protections of minority reasonable time. As a result, reforms to strengthen investors from self-dealing require detailed disclosure investor protections may move ahead on different and define clear duties for directors. They also have fronts—such as through new or amended company well-functioning courts and up-to-date procedural laws, securities regulations or civil procedure rules. rules that give minority shareholders the means to What investor protection reforms has Doing Business prove their case and obtain a judgment within a recorded in Lao PDR (table 7.2)? Table 7.2 How has Lao PDR strengthened investor protections —or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Lao PDR 63 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for ease of shareholder suits indices, scores are assigned Lao PDR are based on detailed information collected to each based on a range of conditions relating to through a survey of corporate and securities lawyers disclosure, director liability and shareholder suits in a about securities regulations, company laws and court standard case study transaction (see the data notes at rules of evidence and procedure. To construct the the end of this chapter). The summary below shows extent of disclosure, extent of director liability and the details underlying the scores for Lao PDR. Summary of scoring for the protecting investors indicators in Lao PDR East Asia & OECD high income Indicator Lao PDR Pacific average average Extent of disclosure index (0-10) 2 5 7 Extent of director liability index (0-10) 1 5 5 Ease of shareholder suits index (0-10) 2 6 7 Strength of investor protection index (0-10) 1.7 5.3 6.2 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Score Score description Extent of disclosure index (0-10) 2 What corporate body provides legally sufficient 0 CEO approval for the transaction? 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 1 Disclosure on the transaction only 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) 1 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction 1 Yes causes to the company? Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller transaction causes 0 Not liable to the company? Whether shareholders can hold members of the approving body liable for the damage that the Buyer- 0 Not liable Seller transaction causes to the company? Doing Business 2014 Lao PDR 64 Score Score description 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 0 No the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 0 No shareholder plaintiff? Whether fines and imprisonment can be applied 0 No against Mr. James? Ease of shareholder suits index (0-10) 2 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 0 No transaction? Whether the plaintiff can obtain any documents from 0 No documents available the defendant and witnesses during trial? Whether the plaintiff can request categories of documents from the defendant without identifying 0 No specific ones? Whether the plaintiff can directly question the 1 Yes 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) 1.7 Source: Doing Business database. Doing Business 2014 Lao PDR 65 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless Tax payments for a manufacturing company complexity in tax rules avoided. According to in 2012 (number per year adjusted for Doing Business data, in economies where it is more electronic and joint filing and payment) difficult and costly to pay taxes, larger shares of economic activity end up in the informal sector — Total number of taxes and contributions paid, where businesses pay no taxes at all. including consumption taxes (value added tax, sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures Time required to comply with 3 major taxes the taxes and mandatory contributions that a (hours per year) medium-size company must pay in a given year as well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about Completing tax return forms, filing with transactions made over the year. Information is proper agencies also compiled on the frequency of filing and Arranging payment or withholding payments as well as time taken to comply with tax laws. The ranking on the ease of paying taxes is Preparing separate tax accounting books, if the simple average of the percentile rankings on required its component indicators: number of annual Total tax rate (% of profit before all taxes) payments, time and total tax rate, with a threshold 1 Profit or corporate income tax being applied to the total tax rate. To make the data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes  TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2011. transactions taxes  The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes  Taxes and mandatory contributions include and mandatory contributions paid during corporate income tax, turnover tax and all the second year of operation are recorded. labor taxes and contributions paid by the  Taxes and mandatory contributions are company. measured at all levels of government.  A range of standard deductions and exemptions are also recorded. 1 The threshold is defined as the highest total tax rate among the top 15% of economies in the ranking on the total tax rate. It is calculated and adjusted on a yearly basis. The threshold is not based on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the indicators toward economies that do not need to levy significant taxes on companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year’s threshold is 25.5%. Doing Business 2014 Lao PDR 66 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Lao PDR stands at 119 in the ranking of 189 taxes in Lao PDR—and how much do firms pay in economies on the ease of paying taxes (figure 8.1). The taxes? On average, firms make 34 tax payments a year, rankings for comparator economies and the regional spend 362 hours a year filing, preparing and paying average ranking provide other useful information for taxes and pay total taxes amounting to 26.8% of profit assessing the tax compliance burden for businesses in (see the summary at the end of this chapter for Lao PDR. details). Figure 8.1 How Lao PDR and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2014 Lao PDR 67 PAYING TAXES What are the changes over time? The benchmarks provided by the economies that over show what is possible in easing the administrative time have had the best performance regionally or burden of tax compliance. And changes in regional globally on the number of payments or the time averages can show where Lao PDR is keeping up—and required to prepare and file taxes (figure 8.2) help where it is falling behind. Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2014 Lao PDR 68 PAYING TAXES Total tax rate (% of profit) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB 2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.5% applied in DB2014, the total tax rate is set at 25.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2014 Lao PDR 69 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. Lao PDR (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has Lao PDR made paying taxes easier —or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. Lao, PDR, has made it easier to pay taxes by consolidating three DB2010 taxes into one improved form and improving the tax office’s lodgement process and tax office staffing. Lao PDR replaced the business turnover tax with a new value DB2011 added tax. DB2012 No reform as measured by Doing Business. Lao PDR made paying taxes less costly for companies by DB2013 reducing the corporate income tax rate. Lao PDR made paying taxes less costly for companies by DB2014 reducing the corporate income tax rate—though it also introduced a new property transfer tax. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Lao PDR 70 PAYING TAXES What are the details? The indicators reported here for Lao PDR are based LOCATION OF STANDARDIZED COMPANY on a standard set of taxes and contributions that would be paid by the case study company used by Doing Business in collecting the data (see the City: Vientiane section in this chapter on what the indicators cover). Tax practitioners are asked to review standard financial statements as well as a standard list of transactions that the company completed The taxes and contributions paid are listed in the during the year. Respondents are asked how much summary below, along with the associated number of in taxes and mandatory contributions the business payments, time and tax rate. must pay and what the process is for doing so. Summary of tax rates and administrative burden in Lao PDR East Asia & Pacific OECD high income Indicator Lao PDR average average Payments (number per year) 34 25 12 Time (hours per year) 362 208 175 Profit tax (%) 20.5 16.4 16.1 Labor tax and contributions (%) 5.6 10.7 23.1 Other taxes (%) 0.7 7.4 2.0 Total tax rate (% profit) 26.8 34.5 41.3 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate taxable Corporate income tax 4 138 28% 20.5 profit Social Security gross 12 42 5% 5.6 contributions salaries depending Property transfer tax 1 0 on type of sale price 0.6 (stamp duty) property Doing Business 2014 Lao PDR 71 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate fixed fee depending Vehicle tax 1 0 LAK 40,000 0 on type of vehicle per LAK 80 to Property tax 1 0 square 0 180 meter immaterial amount - about LAK insurance small Tax on insurance contracts 1 0 0 20,000 plus premium amount LAK 2,000 per page immaterial amount - Stamp duty on general about LAK per small 1 0 0 contracts 20,000 plus contract amount LAK 2,000 per page included in the small Fuel tax 1 0 0 price of amount fuel Business turnover tax on value not 12 182 10% 0 sales (VAT) added included Totals 34 362 26.8 Source: Doing Business database. Doing Business 2014 Lao PDR 72 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from Customs clearance documents a 10% drop in their trading costs than from a similar reduction in the tariffs applied to their Port and terminal handling documents products in global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing Inland transport and handling a standard shipment of goods by sea transport, and the number of documents necessary to Customs clearance and inspections complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation Does not include sea transport time requirements and procedures at customs and other regulatory agencies as well as at the port. They also Cost required to export and import (US$ per cover trade logistics, including the time and cost of container) inland transport to the largest business city. The All documentation ranking on the ease of trading across borders is the simple average of the percentile rankings on its Inland transport and handling component indicators: documents, time and cost Customs clearance and inspections to export and import. Port and terminal handling To make the data comparable across economies, Official costs only, no bribes Doing Business uses several assumptions about the business and the traded goods. The business: military items.  Is of medium size and employs 60 people.  Do not require refrigeration or any other special environment.  Is located in the periurban area of the economy’s largest business city.  Do not require any special phytosanitary or environmental safety standards other than  Is a private, limited liability company, accepted international standards. domestically owned, formally registered and operating under commercial laws and  Are one of the economy’s leading export or regulations of the economy. import products. The traded goods:  Are transported in a dry-cargo, 20-foot full container load.  Are not hazardous nor do they include Doing Business 2014 Lao PDR 73 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Lao PDR? Globally, Lao PDR stands at 161 in the ranking of 189 According to data collected by Doing Business, economies on the ease of trading across borders exporting a standard container of goods requires 10 (figure 9.1). The rankings for comparator economies documents, takes 23 days and costs $1950. Importing and the regional average ranking provide other useful the same container of goods requires 10 documents, information for assessing how easy it is for a business takes 26 days and costs $1910 (see the summary of in Lao PDR to export and import goods. procedures and documents at the end of this chapter for details). Figure 9.1 How Lao PDR and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2014 Lao PDR 74 TRADING ACROSS BORDERS What are the changes over time? The benchmarks provided by the economies that over possible in making it easier to trade across borders. time have had the best performance regionally or And changes in regional averages can show where Lao globally on the documents, time or cost required to PDR is keeping up—and where it is falling behind. export or import (figure 9.2) help show what is Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2014 Lao PDR 75 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2014 Lao PDR 76 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Lao PDR 77 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 Lao PDR (table 9.1)? risk-based inspections and electronic data interchange Table 9.1 How has Lao PDR made trading across borders easier —or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. Lao PDR reduced the time to export and import by DB2013 implementing the ASYCUDA electronic data interchange system at at the Thanaleng–Friendship Bridge border crossing. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Lao PDR 78 TRADING ACROSS BORDERS What are the details? The indicators reported here for Lao PDR are based LOCATION OF STANDARDIZED COMPANY on a set of specific procedural requirements for trading a standard shipment of goods by ocean transport (see the section in this chapter on what City: Vientiane the indicators cover). Information on the procedures as well as the required documents and the time and cost to complete each procedure is The procedural requirements, and the associated time collected from local freight forwarders, shipping and cost, for exporting and importing a standard lines, customs brokers, port officials and banks. shipment of goods are listed in the summary below, along with the required documents. Summary of procedures and documents for trading across borders in Lao PDR East Asia & Pacific OECD high income Indicator Lao PDR average average Documents to export (number) 10 6 4 Time to export (days) 23 21 11 Cost to export (US$ per container) 1,950 856 1,070 Documents to import (number) 10 7 4 Time to import (days) 26 22 10 Cost to import (US$ per container) 1,910 884 1,090 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Procedures to export Time (days) Cost (US$) Documents preparation 15 290 Customs clearance and technical control 2 150 Ports and terminal handling 3 160 Inland transportation and handling 3 1,350 Totals 23 1,950 Procedures to import Time (days) Cost (US$) Documents preparation 13 205 Doing Business 2014 Lao PDR 79 Procedures to import Time (days) Cost (US$) Customs clearance and technical control 7 195 Ports and terminal handling 2 160 Inland transportation and handling 4 1,350 Totals 26 1,910 Documents to export Documents to import Bill of lading Bill of lading Certificate of origin Certificate of origin Commercial Invoice Commercial invoice Customs export declaration Customs import declaration Customs transit document (for Thailand) Customs transit document (for Thailand) Export permit Import permit Inspection report Packing list Packing List Pre-shipment inspection clean report of findings Technical standard/health certificate Technical standard/health certificate Terminal Handling receipts Terminal handling receipts Source: Doing Business database. Doing Business 2014 Lao PDR 80 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Procedures to enforce a contract through courts encourage new business relationships the courts (number) because businesses know they can rely on the courts if a new customer fails to pay. Speedy trials Steps to file and serve the case are essential for small enterprises, which may lack Steps for trial and judgment the resources to stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment Time required to complete procedures What do the indicators cover? (calendar days) Doing Business measures the efficiency of the Time to file and serve the case judicial system in resolving a commercial dispute before local courts. Following the step-by-step Time for trial and obtaining judgment evolution of a standardized case study, it collects Time to enforce the judgment data relating to the time, cost and procedural complexity of resolving a commercial lawsuit. The Cost required to complete procedures (% of ranking on the ease of enforcing contracts is the claim) simple average of the percentile rankings on its Average attorney fees component indicators: procedures, time and cost. Court costs The dispute in the case study involves the breach Enforcement costs of a sales contract between 2 domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The seller and buyer are located in the economy’s largest business city.  The dispute on the quality of the goods requires an expert opinion.  The buyer orders custom-made goods, then fails to pay.  The judge decides in favor of the seller; there is no appeal.  The seller sues the buyer before a competent court.  The seller enforces the judgment through a public sale of the buyer’s movable assets.  The value of the claim is 200% of income per capita.  The seller requests a pretrial attachment to secure the claim. Doing Business 2014 Lao PDR 81 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Lao PDR stands at 104 in the ranking of 189 dispute through the courts in Lao PDR? According to economies on the ease of enforcing contracts (figure data collected by Doing Business, contract enforcement 10.1). The rankings for comparator economies and the takes 443 days, costs 31.6% of the value of the claim regional average ranking provide other useful and requires 42 procedures (see the summary at the benchmarks for assessing the efficiency of contract end of this chapter for details). enforcement in Lao PDR. Figure 10.1 How Lao PDR and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2014 Lao PDR 82 ENFORCING CONTRACTS What are the changes over time? The benchmarks provided by the economies that over help show what is possible in improving the efficiency time have had the best performance regionally or of contract enforcement. And changes in regional globally on the number of steps, time or cost required averages can show where Lao PDR is keeping up—and to enforce a contract through the courts (figure 10.2) where it is falling behind. Figure 10.2 Has enforcing contracts become easier over time? Time (days) Cost (% of claim) Doing Business 2014 Lao PDR 83 ENFORCING CONTRACTS Procedures (number) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Lao PDR 84 ENFORCING CONTRACTS Economies in all regions have improved contract often work on reducing backlogs by introducing enforcement in recent years. A judiciary can be periodic reviews to clear inactive cases from the docket improved in different ways. Higher-income economies and by making procedures faster. What reforms tend to look for ways to enhance efficiency by making it easier (or more difficult) to enforce contracts introducing new technology. Lower-income economies has Doing Business recorded in Lao PDR (table 10.1)? Table 10.1 How has Lao PDR made enforcing contracts easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Lao PDR 85 ENFORCING CONTRACTS What are the details? The indicators reported here for Lao PDR are COURT NAME based on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this City: Vientiane chapter on what the indicators cover). These procedures, and the time and cost of completing Claim Value LCU: 19660377 them, are identified through study of the codes of civil procedure and other court regulations, as well Regional Tribunal N.3 as through surveys completed by local litigation Court Name: Civil Chamber, Vientiane lawyers (and, in a quarter of the economies Capital City Court covered by Doing Business, by judges as well). The procedures for resolving a commercial lawsuit, and the associated time and cost, are listed in the summary below. Summary of procedures for enforcing a contract in Lao PDR—and the time and cost East Asia & Pacific OECD high income Indicator Lao PDR average average Time (days) 443 551 529 Filing and service 30 Trial and judgment 278 Enforcement of judgment 135 Cost (% of claim) 31.6 48.7 21.0 Attorney cost (% of claim) 27.9 Court cost (% of claim) 1.4 Enforcement Cost (% of claim) 2.3 Procedures (number) 42 37 31 Number of procedures (without bonus points) 43 Specialized commercial courts -1 Total number of procedures (including bonus 42 points) Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Doing Business 2014 Lao PDR 86 ENFORCING CONTRACTS No. Procedure Filing and service: Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 1 contract. 2 Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to represent him before the court. Plaintiff’s filing of summons and complaint: Plaintiff files his summons and complaint with the court, orally * or in writing. * Plaintiff’s payment of court fees: Plaintiff pays court duties, stamp duties, or any other type of court fee. Registration of court case: The court administration registers the lawsuit or court case. This includes 3 assigning a reference number to the lawsuit or court case. Assignment of court case to a judge: The court case is assigned to a specific judge through a random * procedure, automated system, ruling of an administrative judge, court officer, etc. Court scrutiny of summons and complaint: A judge examines Plaintiff's summons and complaint for 4 formal requirements. Judge admits summons and complaint: After verifying the formal requirements, the judge decides to * admit Plaintiff’s summons and complaint. Plaintiff’s request for service: Plaintiff makes a written request to the court that process be served on 5 Defendant. 6 Court order for service: Upon Plaintiff’s request, judge orders process be served on Defendant. Delivery of summons and complaint to person authorized to perform service of process on Defendant: 7 The judge or a court officer delivers the summons to a summoning office, officer, or authorized person (including Plaintiff), for service of process on Defendant. First attempt at physical delivery: A first attempt to physically deliver summons and complaint to 8 Defendant is successful in the majority of cases. Second attempt at physical delivery: If a first attempt was not successful, a second attempt to physically 9 deliver 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 10 physical or achieved by registering, marking, debiting or separating assets. (see assumption 5) Doing Business 2014 Lao PDR 87 No. Procedure Custody of assets attached prior to judgment: Defendant's attached assets are put under enforcement 11 officer's or (private) bailiff's care. (see assumption 5) Report on pre-judgment attachment: Court enforcement officer or (private) bailiff issues and delivers a 12 report on the attachment of Defendant’s property to the judge. (see assumption 5) Hearing on pre-judgment attachment: A hearing takes place to resolve the question of whether 13 Defendant’s assets can be attached prior to judgment. This process may include the submission of separate summons and petitions. (see assumption 5) Trial and judgment: Defendant’s deposit of a bond or payment guarantee with the court: Defendant deposits a bond or 14 guarantee with the court. 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. Judge’s resolution on preliminary exemptions: Judge decides on preliminary exemptio ns separately from 15 the merits of the case. Defendant’s filing of defense or answer to Plaintiff’s claim: Defendant files a written pleading which includes his defense or answer on the merits of the case. Defendant's written answer may or may not 16 include witness statements, expert statements, the documents Defendant relies on as evidence and the legal authori Deadline for Plaintiff to answer Defendant's defense or answer: Judge sets the deadline by which Plaintiff 17 will be allowed to answer Defendant's defense or answer. Filing of pleadings: Plaintiff and Defendant file written pleadings and submissions with the court and 18 transmit copies of the written pleadings or submissions to one another. The pleadings may or may not include witness statements or expert (witness) statements. 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 19 appointing an independent expert. (see assumption 6-b of this case) Delivery of expert report by court-appointed expert: The independent expert appointed by the court * delivers his or her expert report to the court. (see assumption 6-b of this case) * Setting of date(s) for oral hearing or trial: The judge sets the date(s) for the oral hearing or trial. * List of (expert) witnesses: The parties file a list of (expert) witnesses with the court. (see assumption 6-a) Summoning of (expert) witnesses: The court summons (expert) witnesses to appear in court for the oral 20 hearing or trial. (see assumption 6-a) Oral hearing (prevalent in civil law): The parties argue the merits of the case at an oral hearing before the 21 judge. Witnesses and a court-appointed independent expert may be heard and questioned at the oral hearing. Doing Business 2014 Lao PDR 88 No. Procedure Adjournments: Court proceedings are delayed because one or both parties request and obtain an 22 adjournment during the oral hearing or trial, resulting in an additional or later trial or hearing date. Order for submission of final arguments: The judge sets the deadline for the submission of final factual 23 and legal arguments. Final arguments: The parties present their final factual and legal arguments to the court either by oral * presentation or by a written submission. 24 Notification of judgment in court: The parties are notified of the judgment at a court hearing. 25 Writing of judgment: The judge produces a written copy of the judgment. Registration of judgment: The court office registers the judgment after receiving a written copy of the 26 judgment. Court notification of availability of the written judgment: The court notifies the parties that the written 27 judgment is available at the courthouse. 28 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. 29 The appeal period starts to run the day the Defendant is formally notified of the judgment. Appeal period: By law, Defendant has the opportunity to appeal the judgment during a period specified in 30 the law. 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 31 Plaintiff for the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented * by a lawyer during the enforcement of judgment phase. Plaintiff’s request for enforcement order: Plaintiff applies to the court to obtain the enforcement order * ('seal' on judgment). Plaintiff’s advancement of enforcement fees: Plaintiff pays the fees related to the enforcement of the 32 judgment. Attachment of enforcement order to judgment: The judge attaches the enforcement order (‘seal’) to the 33 judgment. Delivery of enforcement order: The court's enforcement order is delivered to a court enforcement officer * or a (private) bailiff. Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a 34 (private) bailiff requests Defendant to voluntarily comply with the judgment, giving Defendant a last chance to comply voluntarily with the judgment. Identification of Defendant's assets for attachment by court official or Defendant: Judge, a court 35 enforcement officer, a (private) bailiff or the Defendant himself identifies Defendant's movable assets for attachment. Doing Business 2014 Lao PDR 89 No. Procedure Plaintiff’s identification of Defendant's assets for attachment: Plaintiff identifies Defendant's assets for 36 attachment. Notification of intent to attach: A court enforcement officer or (private) bailiff notifies other creditors of 37 the intent to attach Defendant's goods. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 38 assets). Valuation or appraisal of attached movable goods: The court or court appointed valuation expert 39 evaluates the attached goods. Call for public auction: The judge calls a public auction by, for example, advertising or publication in the 40 newspapers. 41 Sale through public auction: The Defendant’s movable property is sold at public auction. Distribution of proceeds: The proceeds of the public auction are distributed to various creditors (including 42 Plaintiff), according to the rules of priority. 43 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2014 Lao PDR 90 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers’ fees proceedings of individuals and financial Assessors’ and auctioneers’ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Outcome well as public information on bankruptcy systems. Whether business continues operating as a The ranking on the ease of resolving insolvency is going concern or business assets are sold based on the recovery rate, which is recorded as piecemeal cents on the dollar recouped by creditors through Recovery rate for creditors (cents on the reorganization, liquidation or debt enforcement dollar) (foreclosure) proceedings. The recovery rate is a Measures the cents on the dollar recovered function of time, cost and other factors, such as by creditors lending rate and the likelihood of the company continuing to operate. Present value of debt recovered To make the data comparable across economies, Official costs of the insolvency proceedings Doing Business uses several assumptions about the are deducted business and the case. It assumes that the Depreciation of furniture is taken into company: account  Is a domestically owned, limited liability Outcome for the business (survival or not) company operating a hotel. affects the maximum value that can be recovered  Operates in the economy’s largest business city.  Has 201 employees, 1 main secured  Has a higher value as a going concern—and creditor and 50 unsecured creditors. the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2014 Lao PDR 91 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses enforcement procedure (foreclosure). The average characterize the top-performing economies. How recovery rate is 0.0 cents on the dollar. efficient are insolvency proceedings in Lao PDR? Globally, Lao PDR stands at 189 in the ranking of 189 According to data collected by Doing Business, Lao economies on the ease of resolving insolvency (figure PDR receives a “no practice” mark for resolving 11.1). The rankings for comparator economies and the insolvency, indicating that in each of the previous 5 regional average ranking provide other useful years there were no cases involving a judicial benchmarks for assessing the efficiency of insolvency reorganization, judicial liquidation or debt proceedings in Lao PDR. Figure 11.1 How Lao PDR and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2014 Lao PDR 92 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 Lao PDR (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How has Lao PDR made resolving insolvency easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Lao PDR 93 EMPLOYING WORKERS Doing Business measures flexibility in the regulation of employing workers methodology proposed by the employment, specifically as it affects the hiring and consultative group are available on the Doing Business redundancy of workers and the rigidity of working website (http://www.doingbusiness.org). The data on hours. Over the period from 2007 to 2011 employing workers are based on a detailed survey of improvements were made to align the methodology employment regulations that is completed by local for the employing workers indicators with the letter lawyers and public officials. Employment laws and and spirit of the International Labour Organization regulations as well as secondary sources are reviewed (ILO) conventions. Only 4 of the 188 ILO conventions to ensure accuracy. cover areas measured by Doing Business: employee To make the data comparable across economies, termination, weekend work, holiday with pay and night several assumptions about the worker and the work. The Doing Business methodology is fully business are used. consistent with these 4 conventions. The ILO conventions covering areas related to the Employing The worker: Workers indicators do not include the ILO core labor  Earns a salary plus benefits equal to the standards—8 conventions covering the right to economy’s average wage during the entire collective bargaining, the elimination of forced labor, period of his employment. the abolition of child labor and equitable treatment in  Has a pay period that is the most common for workers in the economy. employment practices.  Is a lawful citizen who belongs to the same race and religion as the majority of the Between 2009 and 2011 the World Bank Group worked economy’s population. with a consultative group—including labor lawyers,  Resides in the economy’s largest business city. employer and employee representatives, and experts  Is not a member of a labor union, unless from the ILO, OECD, civil society and the private membership is mandatory. sector—to review the employing workers methodology and explore future areas of research. A i The business:  Is a limited liability company. full report with the conclusions of the consultative  Operates in the economy’s largest business group is available at city. http://www.doingbusiness.org/methodology/employin  Is 100% domestically owned. g-workers.  Operates in the manufacturing sector.  Has 60 employees. This year Doing Business continued research collecting  Is subject to collective bargaining agreements additional data on regulations covering the in economies where such agreements cover probationary period for new employees. more than half the manufacturing sector and apply even to firms not party to them. Doing Business 2014 presents the data on the  Abides by every law and regulation but does not grant workers more benefits than employing workers indicators in an annex. The report mandated by law, regulation or (if applicable) does not present rankings of economies on the collective bargaining agreement. employing workers indicators nor include the topic in the aggregate ranking on the ease of doing business. Detailed data collected on labor regulations and the Doing Business 2014 Lao PDR 94 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 Lao PDR other things, the minimum wage for a 19-year-old (figure 12.1). Figure 12.1 Has the minimum wage for a 19-year-old worker or an apprentice increased over time? Minimum wage (US$ per month) Note: A horizontal line along the x-axis of the figure indicates that the economy has no minimum wage. Source: Doing Business database. Doing Business 2014 Lao PDR 95 EMPLOYING WORKERS Employment laws are needed to protect workers from past 5 years did so in ways that increased labor market arbitrary or unfair treatment and to ensure efficient flexibility. What changes did Lao PDR adopt that contracting between employers and workers. Many affected the Doing Business indicators on employing economies that changed their labor regulations in the workers (table 12.1)? Table 12.1 What changes did Lao PDR make in employing workers in 2013? DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 Lao PDR 96 EMPLOYING WORKERS What are the details? The data on employing workers reported here for Lao public officials. Employment laws and regulations as PDR are based on a detailed survey of employment well as secondary sources are reviewed to ensure regulations that is completed by local lawyers and 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) No limit Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage for a 19-year old worker or an apprentice (US$/month) 75.6 Ratio of minimum wage to value added per worker 0.44 Source: Doing Business database. Doing Business 2014 Lao PDR 97 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 8 hours – other restrictions apply in Standard workday in manufacturing (hours) different sectors of manufacturing. 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 15% operations Premium for work on weekly rest day (% of hourly pay) in case of 150% 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) 15.0 Paid annual leave for a worker with 5 years of tenure (in working days) 15.0 Paid annual leave for a worker with 10 years of tenure (in working days) 15.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 15.0 working days) Source: Doing Business database. Doing Business 2014 Lao PDR 98 EMPLOYING WORKERS Difficulty of redundancy index The difficulty of redundancy index has 8 components: worker; whether the employer needs approval from a whether redundancy is disallowed as a basis for third party to terminate a group of 9 redundant terminating workers; whether the employer needs to workers; whether the law requires the employer to notify a third party (such as a government agency) to reassign or retrain a worker before making the worker terminate 1 redundant worker; whether the employer redundant; whether priority rules apply for needs to notify a third party to terminate a group of 9 redundancies; and whether priority rules apply for redundant workers; whether the employer needs reemployment. approval from a third party to terminate 1 redundant Difficulty of redundancy index Data Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? Yes Third-party approval if 1 worker is dismissed? Yes Third-party notification if 9 workers are dismissed? Yes Third-party approval if 9 workers are dismissed? Yes Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Source: Doing Business database. Doing Business 2014 Lao PDR 99 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 6.4 weeks) Notice period for redundancy dismissal (for a worker with 5 years of tenure, in 6.4 salary weeks) Notice period for redundancy dismissal (for a worker with 10 years of tenure, in 6.4 salary weeks) Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 6.4 of tenure, in salary weeks) Severance pay for redundancy dismissal (for a worker with 1 year of tenure, in 5.2 salary weeks) Severance pay for redundancy dismissal (for a worker with 5 years of tenure, in 39.0 salary weeks) Severance pay for redundancy dismissal (for a worker with 10 years of tenure, in 78.0 salary weeks) Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 40.7 of tenure, in salary weeks) Source: Doing Business database. Doing Business 2014 Lao PDR 100 DATA NOTES The indicators presented and analyzed in Doing rounds of verification, leading to revisions or Business measure business regulation and the expansions of the information collected. protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of ECONOMY CHARACTERISTICS regulation, such as the number of procedures to start a business or to register and transfer commercial property. Second, they gauge the time and cost to Gross national income per capita achieve a regulatory goal or comply with regulation, such as the time and cost to enforce a contract, go Doing Business 2014 reports 2012 income per capita through bankruptcy or trade across borders. Third, as published in the World Bank’s World Development they measure the extent of legal protections of Indicators 2013. Income is calculated using the Atlas property, for example, the protections of investors method (current U.S. dollars). For cost indicators against looting by company directors or the range of expressed as a percentage of income per capita, assets that can be used as collateral according to 2012 gross national income (GNI) in U.S. dollars is secured transactions laws. Fourth, a set of indicators used as the denominator. GNI data were not documents the tax burden on businesses. Finally, a set available from the World Bank for Afghanistan, The of data covers different aspects of employment Bahamas, Bahrain, Barbados, Brunei Darussalam, regulation. The 11 sets of indicators measured in Djibouti, the Islamic Republic of Iran, Kuwait, Libya, Doing Business were added over time, and the sample Myanmar, New Zealand, Oman, San Marino, the of economies expanded. Syrian Arab Republic, West Bank and Gaza, and the Republic of Yemen. In these cases GDP or GNP per The data for all sets of indicators in Doing Business 2 capita data and growth rates from other sources, 2014 are for June 2013. such as the International Monetary Fund’s World Economic Outlook database and the Economist Intelligence Unit, were used. Methodology Region and income group The Doing Business data are collected in a standardized way. To start, the Doing Business team, Doing Business uses the World Bank regional and with academic advisers, designs a questionnaire. The income group classifications, available at questionnaire uses a simple business case to ensure http://data.worldbank.org/about/country- classifications. The World Bank does not assign comparability across economies and over time—with regional classifications to high-income economies. assumptions about the legal form of the business, its For the purpose of the Doing Business report, high- size, its location and the nature of its operations. income OECD economies are assigned the “regional” Questionnaires are administered to more than 10,200 classification OECD high income. Figures and tables local experts, including lawyers, business consultants, presenting regional averages include economies accountants, freight forwarders, government officials from all income groups (low, lower middle, upper and other professionals routinely administering or middle and high income). advising on legal and regulatory requirements (table Population 21.2). These experts have several rounds of interaction with the Doing Business team, involving conference Doing Business 2014 reports midyear 2012 calls, written correspondence and visits by the team. population statistics as published in World For Doing Business 2014 team members visited 33 Development Indicators 2013. economies to verify data and recruit respondents. The data from questionnaires are subjected to numerous The Doing Business methodology offers several advantages. It is transparent, using factual information about what laws and regulations say and allowing 2 The data for paying taxes refer to January – December 2012. multiple interactions with local respondents to clarify Doing Business 2014 Lao PDR 101 potential misinterpretations of questions. Having entrepreneurs reported in the World Bank Enterprise representative samples of respondents is not an issue; Surveys or other perception surveys. Doing Business is not a statistical survey, and the texts This year Doing Business completed subnational of the relevant laws and regulations are collected and studies in Colombia, Italy and the city of Hargeisa answers checked for accuracy. The methodology is (Somaliland) and is currently updating indicators in inexpensive and easily replicable, so data can be Egypt, Mexico and Nigeria. Doing Business also collected in a large sample of economies. Because published regional studies for the g7+ and the East standard assumptions are used in the data collection, African Community. The g7+ group is a country- comparisons and benchmarks are valid across owned and country-led global mechanism established economies. Finally, the data not only highlight the in April 2010 to monitor, report and draw attention to extent of specific regulatory obstacles to business but the unique challenges faced by fragile states. The also identify their source and point to what might be member countries included in the report are reformed. Information on the methodology for each Afghanistan, Burundi, the Central African Republic, Doing Business topic can be found on the Doing Chad, the Comoros, the Democratic Republic of Business website at Congo, Côte d’Ivoire, Guinea, Guinea-Bissau, Haiti, http://www.doingbusiness.org/methodology. Liberia, Papua New Guinea, Sierra Leone, the Solomon Islands, South Sudan, Timor-Leste and Togo. Limits to what is measured The subnational studies point to differences in business regulation and its implementation —as well as The Doing Business methodology has 5 limitations that in the pace of regulatory reform—across cities in the should be considered when interpreting the data. First, same economy. For several economies subnational the collected data refer to businesses in the economy’s studies are now periodically updated to measure largest business city (which in some economies differs change over time or to expand geographic coverage from the capital) and may not be representative of to additional cities. This year that is the case for all the regulation in other parts of the economy. To address subnational studies published. this limitation, subnational Doing Business indicators were created (box 21.1). Second, the data often focus on a specific business form—generally a limited liability company (or its legal equivalent) of a specified Changes in what is measured size—and may not be representative of the regulation The methodology for 2 indicator sets—trading across on other businesses, for example, sole proprietorships. borders and paying taxes—was updated this year. For Third, transactions described in a standardized case trading across borders, documents that are required scenario refer to a specific set of issues and may not purely for purposes of preferential treatment are no represent the full set of issues a business encounters. longer included in the list of documents (for example, Fourth, the measures of time involve an element of a certificate of origin if the use is only to qualify for a judgment by the expert respondents. When sources preferential tariff rate under trade agreements). For indicate different estimates, the time indicators paying taxes, the value of fuel taxes is no longer reported in Doing Business represent the median included in the total tax rate because of the difficulty values of several responses given under the of computing these taxes in a consistent way across all assumptions of the standardized case. economies covered. The fuel tax amounts are in most cases very small, and measuring these amounts is Finally, the methodology assumes that a business has often complicated because they depend on fuel full information on what is required and does not consumption. Fuel taxes continue to be counted in the waste time when completing procedures. In practice, number of payments. completing a procedure may take longer if the business lacks information or is unable to follow up In a change involving several indicator sets, the rule promptly. Alternatively, the business may choose to establishing that each procedure must take at least 1 disregard some burdensome procedures. For both day was removed for procedures that can be fully reasons the time delays reported in Doing Business completed online in just a few hours. This change 2014 would differ from the recollection of affects the time indicator for starting a business, Doing Business 2014 Lao PDR 102 dealing with construction permits and registering with one another, while the distance to frontier property. For procedures that can be fully completed measure benchmarks economies to the frontier in 3 online, the duration is now set at half a day rather than regulatory practice, measuring the absolute distance to a full day. the best performance on each indicator. Both measures can be used for comparisons over time. The threshold for the total tax rate introduced in 2011 When compared across years, the distance to frontier for the purpose of calculating the ranking on the ease measure shows how much the regulatory environment of paying taxes was updated. All economies with a for local entrepreneurs in each economy has changed total tax rate below the threshold (which is calculated over time in absolute terms, while the ease of doing and adjusted on a yearly basis) receive the same business ranking can show only relative change. ranking on the total tax rate indicator. The threshold is not based on any economic theory of an “optimal tax Ease of doing business rate” that minimizes distortions or maximizes efficiency The ease of doing business index ranks economies in the tax system of an economy overall. Instead, it is from 1 to 189. For each economy the ranking is mainly empirical in nature, set at the lower end of the calculated as the simple average of the percentile distribution of tax rates levied on medium-size rankings on each of the 10 topics included in the index enterprises in the manufacturing sector as observed in Doing Business 2014: starting a business, dealing through the paying taxes indicators. This reduces the with construction permits, getting electricity, bias in the indicators toward economies that do not registering property, getting credit, protecting need to levy significant taxes on companies like the investors, paying taxes, trading across borders, Doing Business standardized case study company enforcing contracts, and resolving insolvency. The because they raise public revenue in other ways—for employing workers indicators are not included in this example, through taxes on foreign companies, through year’s aggregate ease of doing business ranking. taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of Construction of the ease of doing business index the methodology). This year the threshold is 25,5%. Here is one example of how the ease of doing business index is constructed. In Denmark it takes 4 procedures, 5.5 days and 0.2% of annual income per capita in fees Data challenges and revisions to open a business. The minimum capital requirement Most laws and regulations underlying the Doing is 24% of annual income per capita. On these 4 Business data are available on the Doing Business indicators Denmark ranks in the 12th, 11th, 1st and website at http://www.doingbusiness.org. All the 79th percentiles. So on average Denmark ranks in the sample questionnaires and the details underlying the 25th percentile on the ease of starting a business. It indicators are also published on the website. Questions ranks in the 21st percentile on getting credit, 19th on the methodology and challenges to data can be percentile on paying taxes, 27th percentile on submitted through the website’s “Ask a Question” enforcing contracts, 5th percentile on resolving function at http://www.doingbusiness.org. insolvency and so on. Higher rankings indicate simpler regulation and stronger protection of property rights. Ease of doing business and distance to The simple average of Denmark’s percentile rankings frontier on all topics is 17th. When all economies are ordered Doing Business 2014 presents results for 2 aggregate by their average percentile rankings, Denmark stands measures: the aggregate ranking on the ease of doing at 5 in the aggregate ranking on the ease of doing business and the distance to frontier measure. The business. ease of doing business ranking compares economies More complex aggregation methods—such as 3 For getting electricity the rule that each procedure must take a principal components and unobserved components— minimum of 1 day still applies because in practice there are no yield a ranking nearly identical to the simple average cases in which procedures can be fully completed online in less than a day. For example, even though in some cases it is possible to apply for an electricity connection online, additional requirements mean that the process cannot be completed in less than 1 day. Doing Business 2014 Lao PDR 103 4 used by Doing Business. Thus, Doing Business uses 58 on enforcing contracts, 116 on dealing with the simplest method: weighting all topics equally and, construction permits and 145 on getting electricity. within each topic, giving equal weight to each of the Variation in performance across the indicator sets is topic components. not at all unusual. It reflects differences in the degree If an economy has no laws or regulations covering a of priority that government authorities give to specific area—for example, insolvency—it receives a particular areas of business regulation reform and the “no practice” mark. Similarly, an economy receives a ability of different government agencies to deliver “no practice” or “not possible” mark if regulation exists tangible results in their area of responsibility. but is never used in practice or if a competing Distance to frontier measure regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the A drawback of the ease of doing business ranking is ranking on the relevant indicator. that it can measure the regulatory performance of economies only relative to the performance of others. The ease of doing business index is limited in scope. It It does not provide information on how the absolute does not account for an economy’s proximity to large quality of the regulatory environment is improving markets, the quality of its infrastructure services (other over time. Nor does it provide information on how than services related to trading across borders and large the gaps are between economies at a single getting electricity), the strength of its financial system, point in time. the security of property from theft and looting, macroeconomic conditions or the strength of The distance to frontier measure is designed to underlying institutions. address both shortcomings, complementing the ease of doing business ranking. This measure illustrates the Variability of economies’ rankings across topics distance of an economy to the “frontier,” and the Each indicator set measures a different aspect of the change in the measure over time shows the extent to business regulatory environment. The rankings of an which the economy has closed this gap. The frontier is economy can vary, sometimes significantly, across a score derived from the most efficient practice or indicator sets. The average correlation coefficient highest score achieved on each of the component between the 10 indicator sets included in the indicators in 10 Doing Business indicator sets aggregate ranking is 0.38, and the coefficients (excluding the employing workers indicators) by any between any 2 sets of indicators range from 0.18 economy. In starting a business, for example, Canada (between getting electricity and getting credit) to 0.58 and New Zealand have achieved the highest (between trading across borders and resolving performance on the number of procedures required (1) insolvency and between trading across borders and and on the time (0.5 days), Denmark and Slovenia on getting electricity). These correlations suggest that the cost (0% of income per capita) and Chile, Zambia economies rarely score universally well or universally and 99 other economies on the paid-in minimum badly on the indicators. capital requirement (0% of income per capita) (table 22.2). Consider the example of Canada. It stands at 19 in the aggregate ranking on the ease of doing business. Its Calculating the distance to frontier for each economy ranking is 2 on starting a business, 4 on protecting involves 2 main steps. First, individual indicator scores investors, and 8 on paying taxes. But its ranking is only are normalized to a common unit: except for the total tax rate, each of the 31 component indicators y is rescaled to (max − y)/(max − min), with the minimum 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, “Doing Business Indicators: Why Aggregate, and How to value (min) representing the frontier—the highest Do It” (World Bank, Washington, DC, 2005). Principal components performance on that indicator across all economies and unobserved components methods yield a ranking nearly since 2003 or the first year the indicator was collected. 5 identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the For the total tax rate, consistent with the calculation of pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less 5 Even though scores for the distance to frontier are calculated from importance in the context of a specific economy. 2005, data from as early as 2003 are used to define the frontier Doing Business 2014 Lao PDR 104 the rankings, the frontier is defined as the total tax rate Economies that improved the most across 3 or at the 15th percentile of the overall distribution of more Doing Business topics in 2012/13 total tax rates for all years. Second, for each economy Doing Business 2014 uses a simple method to calculate the scores obtained for individual indicators are which economies improved the most in the ease of aggregated through simple averaging into one doing business. First, it selects the economies that in distance to frontier score, first for each topic and then 2012/13 implemented regulatory reforms making it across all topics. An economy’s distance to frontier is easier to do business in 3 or more of the 10 topics indicated on a scale from 0 to 100, where 0 represents included in this year’s ease of doing business ranking. 6 the lowest performance and 100 the frontier. Twenty-nine economies meet this criterion: Azerbaijan, The maximum (max) and minimum (min) observed Belarus, Burundi, Côte d’Ivoire, Croatia, Djibouti, values are computed for all economies included in the Gabon, Guatemala, Guinea, Italy, Kosovo, Latvia, the Doing Business sample since 2003 and for all years former Yugoslav Republic of Macedonia, Malaysia, (from 2003 to 2013). To mitigate the effects of extreme Mauritius, Mexico, Moldova, Mongolia, Morocco, outliers in the distributions of the rescaled data (very Panama, the Philippines, the Republic of Congo, few economies need 694 days to complete the Romania, the Russian Federation, Rwanda, Sri Lanka, procedures to start a business, but many need 9 days), Ukraine, Uzbekistan and the United Arab Emirates. th the maximum (max) is defined as the 95 percentile of Second, Doing Business sorts these economies on the the pooled data for all economies and all years for increase in their distance to frontier measure from the each indicator. The exceptions are the getting credit, previous year using comparable data. protecting investors and resolving insolvency Selecting the economies that implemented regulatory indicators, whose construction precludes outliers. In reforms in at least 3 topics and improved the most in addition, the cost to export and cost to import for each the distance to frontier measure is intended to year are divided by the GDP deflator, so as to take the highlight economies with ongoing, broadbased reform general price level into account when benchmarking programs. The criterion for identifying the top these absolute-cost indicators across economies with improvers was changed from last year. The different inflation trends. The base year for the deflator improvement in ease of doing business ranking is no is 2013 for all economies. longer used. The improvement in the distance to The difference between an economy’s distance to frontier measure is used instead because under this frontier score in any previous year and its score in measure economies are sorted according to their abs- 2013 illustrates the extent to which the economy has olute improvement instead of relative improvement. closed the gap to the frontier over time. And in any given year the score measures how far an economy is from the highest performance at that time. Take Colombia, which has a score of 70.5 on the distance to frontier measure for 2014. This score indicates that the economy is 29.5 percentage points away from the frontier constructed from the best performances across all economies and all years. Colombia was further from the frontier in 2009, with a score of 66.2. The difference between the scores shows an improvement over time. The distance to frontier measure can also be used for comparisons across economies in the same year, complementing the ease of doing business ranking. For example, Colombia stands at 63 this year in the ease of doing business ranking, while Peru, which is 6 Doing Business reforms making it more difficult to do business are 29.3 percentage points from the frontier, stands at 42. subtracted from the total number of those making it easier to do business. Doing Business 2014 Lao PDR 106 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2014 business regulation http://www.doingbusiness.org reforms, lists of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 189 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 189 economies—topic rankings, indicator values, lists of regulatory procedures and Law library details underlying indicators Online collection of business laws and regulations http://www.doingbusiness.org/data/ relating to business and gender issues http://www.doingbusiness.org/law-library/ Reports http://wbl.worldbank.org/ Access to Doing Business reports as well as subnational and regional reports, reform case Contributors studies and customized economy and regional More than 10,200 specialists in 189 economies profiles who participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers Entrepreneurship data underlying Doing Business Data on business density for 139 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics/e ntrepreneurship Research Abstracts of papers on Doing Business topics and Doing Business iPhone App related policy issues Doing Business at a Glance App presents the full http://www.doingbusiness.org/research/ report, rankings and highlights http://www.doingbusiness.org/specialfeatures/ iphone Doing Business 2014 Lao PDR 107