Doing Business 2017 Bosnia and Herzegovina Economy Profile 2017 Bosnia and Herzegovina Doing Business 2017 Bosnia and Herzegovina 2 © 2017 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 19 18 17 16 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http://creativecommons.org/licenses/by/3.0/igo. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: World Bank. 2017. Doing Business 2017: Equal Opportunity for All. Washington, DC: World Bank. DOI: 10.1596/978-1-4648-0948-4. License: Creative Commons Attribution CC BY 3.0 IGO Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. Adaptations—If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank. . Third-party content—The World Bank does not necessarily own each component of the content contained within the work. The World Bank therefore does not warrant that the use of any third-party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. ISBN (paper): 978-1-4648-0948-4 ISBN (electronic): 978-1-4648-0984-2 DOI: 10.1596/978-1-4648-0948-4 ISSN: 1729-2638 COVER DESIGN: CORPORATE VISIONS, INC. Doing Business 2017 Bosnia and Herzegovina 3 CONTENTS Introduction .................................................................................................................................. 4 Starting a business ..................................................................................................................... 17 Dealing with conustruction permits ........................................................................................ 26 Getting electricity ....................................................................................................................... 40 Registering property .................................................................................................................. 49 Getting credit .............................................................................................................................. 60 Protecting minority investors ................................................................................................... 66 Paying taxes ................................................................................................................................ 73 Trading across borders .............................................................................................................. 79 Enforcing contracts .................................................................................................................... 85 Resolving insolvency .................................................................................................................. 92 Labor market regulation ........................................................................................................... 96 Distance to frontier and ease of doing business ranking .................................................... 102 Resources on the Doing Business website ............................................................................ 105 Doing Business 2017 Bosnia and Herzegovina 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is comparison, it also provides data for other selected for a local entrepreneur to open and run a small to economies (comparator economies) for each indicator. medium-size business when complying with relevant The data in this report are current as of June 1, 2016 regulations. It measures and tracks changes in (except for the paying taxes indicators, which cover the regulations affecting 11 areas in the life cycle of a period January–December 2015). business: starting a business, dealing with construction The Doing Business methodology has limitations. Other permits, getting electricity, registering property, getting areas important to business—such as an economy’s credit, protecting minority investors, paying taxes, proximity to large markets, the quality of its trading across borders, enforcing contracts, resolving infrastructure services (other than those related to insolvency and labor market regulation. Doing Business trading across borders and getting electricity), the 2017 presents the data for the labor market regulation security of property from theft and looting, the indicators in an annex. The report does not present transparency of government procurement, rankings of economies on labor market regulation macroeconomic conditions or the underlying strength of indicators or include the topic in the aggregate distance institutions—are not directly studied by Doing Business. to frontier score or ranking on the ease of doing The indicators refer to a specific type of business, business. generally a local limited liability company operating in In a series of annual reports Doing Business presents the largest business city. Because standard assumptions quantitative indicators on business regulations and the are used in the data collection, comparisons and protection of property rights that can be compared benchmarks are valid across economies. The data not across 190 economies, from Afghanistan to Zimbabwe, only highlight the extent of obstacles to doing business; over time. The data set covers 48 economies in Sub- they also help identify the source of those obstacles, Saharan Africa, 32 in Latin America and the Caribbean, 25 supporting policy makers in designing regulatory reform. in East Asia and the Pacific, 25 in Eastern Europe and More information is available in the full report. Doing Central Asia, 20 in the Middle East and North Africa and Business 2017 presents the indicators, analyzes their 8 in South Asia, as well as 32 OECD high-income relationship with economic outcomes and presents economies. The indicators are used to analyze economic business regulatory reforms. The data, along with outcomes and identify what reforms have worked, where information on ordering Doing Business 2017, are and why. available on the Doing Business website at This economy profile presents the Doing Business http://www.doingbusiness.org. indicators for Bosnia and Herzegovina. To allow useful Doing Business 2017 Bosnia and Herzegovina 5 CHANGES IN DOING BUSINESS 2017 As part of a three-year update in methodology, Doing having equal evidentiary weight of women’s testimony in Business 2017 expands further by adding postfiling court. processes to the paying taxes indicator, including a Also for the first time this year Doing Business collects gender component in three of the indicators and data on Somalia, bringing the total number of developing a new pilot indicator on selling to the economies covered to 190. government. Also, for the first time this year Doing Business collects data on Somalia, bringing the total For more details on the changes, see the “”Old and new number of economies covered to 190. factors covered in Doing Business” section in the The paying taxes indicator is expanded this year to Overview chapter starting on page 1 of the Doing include postfiling processes – those processes that occur Business 2017 report. For more details on the data and after a firm complies with its regular tax obligations. methodology, please see the “Data Notes” chapter These include tax refunds, tax audits and tax appeals. In starting on page 114 of the Doing Business 2017 report. particular, Doing Business measures the time it takes to For more details on the distance to frontier metric, get a value added tax (VAT) refund, deal with a simple please see the “Distance to frontier and ease of doing mistake on a corporate tax return that can potentially business ranking” chapter in this profile. trigger an audit and good practices with administrative appeals process. This year’s Doing Business report presents a gender dimension in four of the indicator sets: starting a business, registering property, enforcing contracts and labor market regulation. Three of these areas are included in the distance to frontier score and in the ease of doing business ranking, while the fourth —labor market regulation—is not. Doing Business has traditionally assumed that the entrepreneurs or workers discussed in the case studies were men. This was incomplete by not reflecting correctly the Doing Business processes as applied to women—which in some economies may be different from the processes applied to men. Starting this year, Doing Business measures the starting a business process for two case scenarios: one where all entrepreneurs are men and one where all entrepreneurs are women. In economies where the processes are more onerous if the entrepreneur is a woman, Doing Business now counts the extra procedures applied to roughly half of the population that is female (for example, obtaining a husband’s consent or gender-specific requirements for opening a personal bank account when starting a business). Within the registering property indicators, a gender component has been added to the quality of land administration index. This component measures women’s ability to use, own, and transfer property according to the law. Finally, within the enforcing contracts indicator set, economies will be scored on Doing Business 2017 Bosnia and Herzegovina 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW 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 business Region: Europe & Central Asia based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: Upper middle income businesses through their life cycle. Economies are ranked from 1 to 190 by the ease of doing business ranking. Population: 3,810,416 Doing Business presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 4,680 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier scores, DB2017 rank: 81 rounded to two decimals. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where DB2016 rank: 79* 0 represents the worst performance and 100 the frontier. Change in rank: -2 (See the chapter on the distance to frontier and ease of doing business). DB 2017 DTF: 63.87 The ease of doing business ranking compares economies with one another; the distance to frontier score DB 2016 DTF: 63.07 benchmarks economies with respect to regulatory best practice, showing the absolute distance to the best Change in DTF: 0.8 performance on each Doing Business indicator. When compared across years, the distance to frontier score * DB2016 ranking shown is not last year’s published shows how much the regulatory environment for local ranking but a comparable ranking for DB2016 that entrepreneurs in an economy has changed over time in captures the effects of such factors as data revisions absolute terms, while the ease of doing business ranking and the changes in methodology. See the data notes can show only how much the regulatory environment has starting on page 114 of the Doing Business 2017 changed relative to that in other economies. report for sources and definitions. The 10 topics included in the ranking in Doing Business 2017: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The labor market regulation indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented in the economy profile. Doing Business 2017 Bosnia and Herzegovina 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 2017 Bosnia and Herzegovina THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How Bosnia and Herzegovina and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2016 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Bosnia and Herzegovina (Scale: Rank 190 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - Bosnia and Herzegovina (Scale: Score 0 center, Score 100 outer edge) Source: Doing Business database. Note: The rankings are benchmarked to June 2016 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Doing Business 2017 Bosnia and Herzegovina 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier score. tells only part of the story, so do changes in that ranking. This measure shows how far on average an economy is Yearly movements in rankings can provide some indication from the best performance achieved by any economy on of changes in an economy’s regulatory environment for each Doing Business indicator. firms, but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed over time—how far it has moved toward (or away from) in different areas. To aid in assessing such changes, the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has Bosnia and Herzegovina come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits, registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are only comparable to 2014. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 114 of the Doing Business 2017 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for Bosnia and Herzegovina Bosnia and Herzegovina Bosnia and Herzegovina Best performer globally Czech Republic DB2017 Montenegro DB2017 Albania DB2017 Kosovo DB2017 Croatia DB2017 Greece DB2017 Indicator DB2017 DB2016 DB2017 Starting a Business 174 175 46 95 81 56 13 58 1 (New Zealand) (Rank) Starting a Business (DTF 65.09 63.60 91.73 85.56 86.86 90.70 95.54 90.07 99.96 (New Zealand) Score) Procedure – Men 12.0 12.0 5.0 8.0 8.0 5.0 3.0 6.0 1.0 (New Zealand) (number) Time – Men (days) 65.0 67.0 5.0 7.0 9.0 13.0 6.0 10.0 0.5 (New Zealand) Cost – Men (% of 13.5 14.1 10.1 7.3 5.7 2.2 1.1 1.5 0.0 (Slovenia) income per capita) Procedure – Women 12.0 12.0 5.0 8.0 8.0 5.0 3.0 6.0 1.0 (New Zealand) (number) Time – Women (days) 65.0 67.0 5.0 7.0 9.0 13.0 6.0 10.0 0.5 (New Zealand) Cost – Women (% of 13.5 14.1 10.1 7.3 5.7 2.2 1.1 1.5 0.0 (Slovenia) income per capita) Paid-in min. capital (% 13.4 28.0 0.0 25.5 0.0 0.0 0.0 0.0 0.0 (127 Economies*) of income per capita) Dealing with 170 168 106 128 130 58 129 93 1 (New Zealand) Construction Permits Doing Business 2017 Bosnia and Herzegovina 12 Bosnia and Herzegovina Bosnia and Herzegovina Best performer globally Czech Republic DB2017 Montenegro DB2017 Albania DB2017 Kosovo DB2017 Croatia DB2017 Greece DB2017 Indicator DB2017 DB2016 DB2017 (Rank) Dealing with Construction Permits 52.54 51.54 67.61 63.41 62.76 73.63 63.31 68.82 87.40 (New Zealand) (DTF Score) Procedures (number) 15.0 15.0 16.0 19.0 21.0 17.0 15.0 8.0 7.0 (4 Economies*) Time (days) 179.0 179.0 220.0 127.0 247.0 124.0 152.0 152.0 28.0 (Korea, Rep.) Cost (% of warehouse 0.1 (Trinidad and 18.5 19.3 3.3 8.3 0.3 1.8 6.1 11.3 value) Tobago) Building quality control 13.0 13.0 13.0 12.0 12.0 12.0 9.0 12.0 15.0 (Luxembourg*) index (0-15) Getting Electricity 123 120 156 68 13 52 114 167 1 (Korea, Rep.) (Rank) Getting Electricity (DTF 60.05 60.00 48.30 76.25 90.32 80.57 61.85 43.50 99.88 (Korea, Rep.) Score) Procedures (number) 8.0 8.0 6.0 5.0 4.0 6.0 7.0 7.0 3.0 (15 Economies*) Time (days) 125.0 125.0 134.0 65.0 68.0 51.0 36.0 142.0 18.0 (Korea, Rep.*) Cost (% of income per 400.2 418.3 515.5 303.2 25.0 69.9 253.1 440.5 0.0 (Japan) capita) Reliability of supply and transparency of tariff 6.0 6.0 0.0 5.0 8.0 7.0 2.0 0.0 8.0 (26 Economies*) index (0-8) Registering Property 99 97 106 62 31 141 33 78 1 (New Zealand) (Rank) Registering Property 61.54 61.52 58.77 69.77 79.68 49.67 78.11 65.82 94.46 (New Zealand) (DTF Score) Procedures (number) 7.0 7.0 6.0 5.0 4.0 10.0 6.0 6.0 1.0 (4 Economies*) Doing Business 2017 Bosnia and Herzegovina 13 Bosnia and Herzegovina Bosnia and Herzegovina Best performer globally Czech Republic DB2017 Montenegro DB2017 Albania DB2017 Kosovo DB2017 Croatia DB2017 Greece DB2017 Indicator DB2017 DB2016 DB2017 Time (days) 24.0 24.0 19.0 62.0 28.0 20.0 27.0 69.0 1.0 (3 Economies*) Cost (% of property 5.2 5.2 9.9 5.0 4.0 4.8 0.3 3.1 0.0 (Saudi Arabia) value) Quality of the land administration index (0- 12.5 12.5 15.5 22.5 25.0 4.5 20.5 17.5 29.0 (Singapore) 30) Getting Credit (Rank) 44 42 44 75 32 82 20 7 1 (New Zealand) Getting Credit (DTF 65.00 65.00 65.00 55.00 70.00 50.00 75.00 85.00 100.00 (New Zealand) Score) Strength of legal rights 7.0 7.0 7.0 5.0 7.0 3.0 9.0 12.0 12.0 (3 Economies*) index (0-12) Depth of credit 6.0 6.0 6.0 6.0 7.0 7.0 6.0 5.0 8.0 (30 Economies*) information index (0-8) Credit registry coverage 37.6 38.0 38.9 0.0 6.8 0.0 38.1 30.8 100.0 (3 Economies*) (% of adults) Credit bureau coverage 10.4 9.9 0.0 100.0 79.2 79.6 0.0 0.0 100.0 (23 Economies*) (% of adults) Protecting Minority 81 78 19 27 53 42 63 42 1 (New Zealand*) Investors (Rank) Protecting Minority 55.00 55.00 71.67 66.67 60.00 63.33 58.33 63.33 83.33 (New Zealand*) Investors (DTF Score) Strength of minority investor protection 5.5 5.5 7.2 6.7 6.0 6.3 5.8 6.3 8.3 (New Zealand) index (0-10) Extent of conflict of interest regulation 4.7 4.7 7.7 5.7 5.3 5.3 5.3 6.3 9.3 (New Zealand) index (0-10) Extent of shareholder 6.3 6.3 6.7 7.7 6.7 7.3 6.3 6.3 8.3 (Norway) governance index (0- Doing Business 2017 Bosnia and Herzegovina 14 Bosnia and Herzegovina Bosnia and Herzegovina Best performer globally Czech Republic DB2017 Montenegro DB2017 Albania DB2017 Kosovo DB2017 Croatia DB2017 Greece DB2017 Indicator DB2017 DB2016 DB2017 10) 1 (United Arab Paying Taxes (Rank) 133 151 97 49 53 64 43 57 Emirates) Paying Taxes (DTF 99.44 (United Arab 60.08 55.15 70.96 81.74 80.69 78.22 83.24 80.42 Score) Emirates) Payments (number per 3.0 (Hong Kong SAR, 34.0 45.0 34.0 31.0 8.0 8.0 10.0 18.0 year) China*) Time (hours per year) 411.0 420.0 261.0 206.0 234.0 193.0 155.0 300.0 55.0 (Luxembourg) Total tax rate (% of 22.6 23.3 36.5 20.9 50.0 50.7 15.2 22.2 26.1 (32 Economies*) profit) Postfiling index (0-100) 47.9 83.0 97.9 94.3 79.3 61.0 85.5 98.5 (Estonia) Trading across Borders 36 36 24 1 1 29 51 43 1 (10 Economies*) (Rank) Trading across Borders 100.00 (10 91.87 91.87 96.29 100.00 100.00 93.72 85.93 88.75 (DTF Score) Economies*) Time to export: Border 5 5 9 0 0 24 42 8 0 (18 Economies*) compliance (hours) Cost to export: Border 106 106 55 0 0 300 137 158 0 (18 Economies*) compliance (USD) Time to export: Documentary 4 4 6 1 1 1 38 5 1 (25 Economies*) compliance (hours) Cost to export: Documentary 92 92 10 0 0 30 127 67 0 (19 Economies*) compliance (USD) Time to import: Border 6 6 10 0 0 1 16 23 0 (25 Economies*) compliance (hours) Doing Business 2017 Bosnia and Herzegovina 15 Bosnia and Herzegovina Bosnia and Herzegovina Best performer globally Czech Republic DB2017 Montenegro DB2017 Albania DB2017 Kosovo DB2017 Croatia DB2017 Greece DB2017 Indicator DB2017 DB2016 DB2017 Cost to import: Border 109 109 77 0 0 0 83 306 0 (28 Economies*) compliance (USD) Time to import: Documentary 8 8 8 1 1 1 6 10 1 (29 Economies*) compliance (hours) Cost to import: Documentary 97 97 10 0 0 0 42 100 0 (30 Economies*) compliance (USD) Enforcing Contracts 64 63 116 7 68 133 44 41 1 (Korea, Rep.) (Rank) Enforcing Contracts 60.60 60.60 53.66 75.87 60.36 50.19 65.66 66.75 84.15 (Korea, Rep.) (DTF Score) Time (days) 595.0 595.0 525.0 572.0 611.0 1580.0 330.0 545.0 164.0 (Singapore) Cost (% of claim) 36.0 36.0 34.9 16.7 33.0 14.4 34.4 25.7 9.0 (Iceland) Quality of judicial 11.0 11.0 6.0 15.0 10.5 12.0 9.5 11.5 15.5 (Australia) processes index (0-18) Resolving Insolvency 41 40 43 54 26 52 163 40 1 (Finland) (Rank) Resolving Insolvency 66.93 66.42 64.96 55.62 76.42 56.66 20.88 68.37 93.89 (Finland) (DTF Score) Recovery rate (cents on 37.3 36.3 42.3 33.7 66.5 35.6 38.8 48.6 92.9 (Norway) the dollar) Time (years) 3.3 3.3 2.0 3.1 2.1 3.5 2.0 1.4 0.4 (22 Economies*) Cost (% of estate) 9.0 9.0 10.0 14.5 17.0 9.0 15.0 8.0 1.0 (22 Economies*) Strength of insolvency 15.0 15.0 13.5 12.0 13.0 12.0 0.0 13.5 15.0 (6 Economies*) framework index (0-16) Source: Doing Business database. Note: DB2016 rankings shown are not last year’s published rankings but comparable rankings for DB2016 that capture the effects of such factors as data revisions and changes to the methodology. The global best performer on time for paying taxes is defined as the lowest Doing Business 2017 Bosnia and Herzegovina 16 time recorded among all economies in the DB2017 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. * 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). Doing Business 2017 Bosnia and Herzegovina 17 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 well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Obtaining approval from spouse to start a generating more revenue for the government. business, to leave the home to register the company or open a bank account. What do the indicators cover? Obtaining any gender specific document for Doing Business records all procedures officially company registration and operation, national required, or commonly done in practice, for an identification card or opening a bank entrepreneur to start up and formally operate an account. industrial or commercial business, as well as the time and cost to complete these procedures and the paid- Time required to complete each procedure in minimum capital requirement. These procedures (calendar days) include obtaining all necessary licenses and permits Does not include time spent gathering and completing any required notifications, information verifications or inscriptions for the company and employees with relevant authorities. The ranking of Each procedure starts on a separate day (2 economies on the ease of starting a business is procedures cannot start on the same day). determined by sorting their distance to frontier Procedures that can be fully completed scores for starting a business. These scores are the online are recorded as ½ day. simple average of the distance to frontier scores for Procedure completed once final document is each of the component indicators. received To make the data comparable across economies, No prior contact with officials several assumptions about the business and the procedures are used. It is assumed that any required Cost required to complete each procedure information is readily available and that the (% of income per capita) entrepreneur will pay no bribes. Assumptions about Official costs only, no bribes the business: No professional fees unless services required  Is a limited liability company (or its legal by law or commonly used in practice equivalent). If there is more than one type of limited liability company in the economy, the Paid-in minimum capital (% of income limited liability form most common among per capita) domestic firms is chosen. Information on the Deposited in a bank or with a notary before most common form is obtained from registration (or within 3 months) incorporation lawyers or the statistical office.  Operates in the economy’s largest business city.  The size of the entire office space is For 11 economies the data are also collected for the second largest business city. approximately 929 square meters (10,000 square feet). Doing Business 2017 Bosnia and Herzegovina 18  Is 100% domestically owned and has five owners,  Does not qualify for investment incentives or none of whom is a legal entity. any special benefits.  Has start-up capital of 10 times income per  Has at least 10 and up to 50 employees one capita month after the commencement of operations, all of them domestic nationals.  Performs general industrial or commercial activities, such as the production or sale to the  Has a turnover of at least 100 times income per public of products or services. The business does capita. not perform foreign trade activities and does not  Has a company deed 10 pages long handle products subject to a special tax regime, for example, liquor or tobacco. It is not using The owners: heavily polluting production processes.  Have reached the legal age of majority and are  Leases the commercial plant or offices and is not capable of making decisions as an adult. If a proprietor of real estate. there is no legal age of majority, they are assumed to be 30 years old.  The amount of the annual lease for the office space is equivalent to 1 times income per capita.  Are sane, competent, in good health and have no criminal record.  Are married, the marriage is monogamous and registered with the authorities.  Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Doing Business 2017 Bosnia and Herzegovina 19 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Bosnia and both men and women. Most indicator sets refer to a case Herzegovina? According to data collected by Doing scenario in the largest business city of an economy, Business, starting a business there requires 12.0 except for 11 economies for which the data are a procedures , takes 65.0 days, costs 13.5% of income per population-weighted average of the 2 largest business capita for men, and requires 12.0 procedures , takes 65.0 cities. See the chapter on distance to frontier and ease of days, costs 13.5% of income per capita for women. A doing business ranking at the end of this profile for more requirement of paid-in minimum capital of 13.4% of details. income per capita (figure 2.1) is legally mandatory for Figure 2.1 What it takes to start a business in Bosnia and Herzegovina Paid-in minimum capital (% of income per capita): 13.4 Source: Doing Business database. 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. Procedures in light blue for married women only. Doing Business 2017 Bosnia and Herzegovina 20 STARTING A BUSINESS Globally, Bosnia and Herzegovina stands at 174 in the other useful information for assessing how easy it is for ranking of 190 economies on the ease of starting a an entrepreneur in Bosnia and Herzegovina to start a business (figure 2.2). The rankings for comparator business. economies and the regional average ranking provide Figure 2.2 How Bosnia and Herzegovina and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 21 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in Bosnia and Herzegovina (table 2.1)? Table 2.1 How has Bosnia and Herzegovina made starting a business easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Bosnia and Herzegovina made starting a business easier by replacing the required utilization permit with a simple DB2012 notification of commencement of activities and by streamlining the process for obtaining a tax identification number. Bosnia and Herzegovina made starting a business easier by reducing the paid-in minimum capital requirement for limited DB2017 liability companies and increasing the efficiency of the notary system. Source: Doing Business database. 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. Doing Business 2017 Bosnia and Herzegovina 22 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Bosnia and Herzegovina is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and Legal form: Limited Liability Company register a new firm. These are identified by Doing Business through collaboration with relevant local Paid-in minimum capital requirement: BAM professionals and the study of laws, regulations and 1,000 publicly available information on business entry in City: Sarajevo that economy. Following is a detailed summary of those procedures, along with the associated time and Start-up Capital: 10 times GNI per capita 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). Table 2.2 Summary of time, cost and procedures for starting a business in Bosnia and Herzegovina Time to No. Procedure Cost to complete complete Stipulate a founding act and have it notarized by a notary The system of Notary was introduced in May 2007: The Law on Enterprises of FBiH; The Law on Notary of FBiH. The amended Law on Enterprise determines that all legal entities are required to harmonize business activities in accordance with a new Standard Classification of Activity. The Law on Notary requires all documentation needed for registration of a company to be prepared and certified by the public notary. Under the Notary Tariffs of Federation of BiH (Official Gazette of Federation of BiH No. 57/13) the fees for a notary processing of the Founding Act and Statute of the Company notary depend on the value 1 of the company's share capital as follows: Between 1-5 days BAM 350 1.Fee in the amount of BAM 300 if the share capital amount does not exceed BAM 50.000; 2.Fee in the amount of BAM 350 if the share capital amount is between BAM 50.000 and BAM 100.000 and 3.If the value of the concerned legal or any other activity exceeds BAM 100.000, notary is obliged to calculate the fee (in addition to the award of BAM 350) in the amount of BAM 50 for each started BAM 100.000 but not in the amount exceeding BAM 2.000. Agency: Notary's Office Doing Business 2017 Bosnia and Herzegovina 23 Time to No. Procedure Cost to complete complete Obtain a statement from commercial bank that full amount of the capital has been paid in; pay the registration fee to the budget account of the cantonal court The founder should pay the amount of the capital to a temporary 2 account at one of the local banks, to be subsequently transferred to the 1 day no charge company transaction account after its opening. Agency: Commercial Bank Obtain the statement of tax authorities that the founders have no tax debts Statement of tax authorities is required, which confirms that the entrepreneur does not have any unpaid pecuniary fines and it costs 1 day BAM 15 3 BAM 15. Agency: Tax bureau Court registration with Municipal Courts By law, regulated forms must be completed. These forms may be purchased at a stationery shop or at the court (BAM 15), to be prepared according to the regulations on registering legal entities in the court register. After the court registration of the new company, the court informs the Official Gazette to announce the prepared notice. Companies are automatically registered for membership in the BAM 405 chambers of economy at the state, entity, canton, and regional levels. (registration fee) + 4 Since 2004, membership in the Chamber of Economy of the Federation 10 days BAM 150 of Bosnia and Herzegovina and the Chamber of Economy of the (publishing fee) Republica Srpska is voluntary. Forms for registration of the company are available online, free of charge. Forms for Municipal Court in Sarajevo are available at www.oss.ba Agency: Municipal Court Buy a company stamp The electronic version of the forms is available on the website of some of the competent courts, for e.g. for the Municipal Court in Sarajevo, 5 the forms are available on the web site www.oss.ba. 1 day BAM 40 Agency: Shops dealing with stamp making Doing Business 2017 Bosnia and Herzegovina 24 Time to No. Procedure Cost to complete complete Obtain the Certificate of the business premises The 4 municipalities making up the City of Sarajevo have reduced the cost for this procedure to BAM 10. The Company founder goes to the municipality, fills out a request form and attaches all required documents (proof of company's court registration, statement confirming that all business premises fulfill 10 days BAM 10 6 conditions mandated by the law, and notification about the date when the company will start with operations) and the proof of payment of the administrative fee. Then, the time necessary to obtain the resolution on intended activities takes about 10 days. Agency: Municipalities Notify the commencement of the business activities to the Cantonal Inspection Authority The company submits the notification on commencement of business activities to the Cantonal Inspection Authority and the inspectors may subsequently make supervision in terms of fulfillment of all conditions for conducting of business activities. New Law on Internal Trade (Official Gazette of FB&H, no.40/10) is enforced. It regulates that the notification on commencement of 1 day no charge 7 business activities should be submitted by the company no later than 5 days before starting to work. The following document should be submitted: court resolution on registration in the registry, statement that the company meets all legal requirements for performing trade activities and notice of the date of commencement of work. Agency: Ministry of Commerce Apply for company identification number with the competent tax office When filing an application for statistical and taxpayer numbers simultaneously with the competent tax authorities (according to Regulations on Obtaining ID Numbers [Official Gazette No. 39/02]), the newly incorporated company must submit with the application form a photocopy of the court resolution (registration) and the contract on the 8 lease of the business premises, resolution of the competent 5 days no charge municipality on the intended activities (this resolution must confirm that certain activities may be exercised at a certain address), and a copy of the Director of the company's ID card and a copy of the agreement on providing the accountant services. Newly adopted Rulebook (as published in the OG FBiH 02/10) regulates new tax registration procedures that streamlines the process for legal entities. In accordance with the new Article 8a of this Rulebook, Doing Business 2017 Bosnia and Herzegovina 25 Time to No. Procedure Cost to complete complete respective court and tax administration initiate tax registration by mutual official correspondence and legal entities are only obliged to submit required documents (copy of court registry, 2 copies of application form including company's stamp, and copies of ID cards) after the court registration is completed. This Rulebook does not require submission of following documents (as previously requested: 1) contract on the lease of the business premises and 2) resolution of the competent municipality on the intended activities. Agency: Tax Bureau and Federal Bureau for Statistics Open a company account with commercial bank All new businesses must open a company account with commercial bank. Due to the anti-money laundering requirements, opening account in commercial bank has to be done by the company's authorized 9 representative in person. 1 day no charge Agency: Commercial Bank VAT registration Per article 57 of the Bosnia and Herzegovina Law on Value Added Tax, VAT registration is obligatory for companies with the annual profit over BAM 50.000. It is necessary to submit the Request for registration into the competent VAT registry. The request is accompanied by the following documents: - Certified copy of the registration into the court registry; - Certified copy of the certificate of registration from the Tax Administration of FB&H; - Certified copy of the notification of the Bureau for Statistics; - Certified copy of the Directors ID; - Certified copy of the card of deposited signatures from the bank in which the transaction account is opened; BAM 40 10 30 days - Statement about the goods to be imported or exported by the firm; - Statement about the feasibility of estimated turnover and a the evidence on the realization of the same in terms of concluded business contracts; - Copy of the contract of the lease of business premises for the company seat or evidence of the ownership registered in the land registry; - Personal ID number for the responsible accountant. It is also necessary to pay the following taxes: Tax on the request for VAT registration in the amount of BAM 10; tax for issuing the Decision on registration in the VAT register in the amount of BAM 10; tax for issuing the Certificate on registration in the VAT register in the amount of BAM 20. Doing Business 2017 Bosnia and Herzegovina 26 Time to No. Procedure Cost to complete complete Agency: Indirect Taxation Authority Enroll the employees in health insurance with Health Insurance Institute and in the pension insurance Law on Unified System of Registration, Control and Collection of Contributions (Official Gazette of FB&H, no. 42/09 and 109/12) regulates completely new system of registration. In accordance with the Article 14 of this Law, the company is obliged to submit the application for registration for every new employee, within seven (7) days from the 11 date of commencement of work. The following document should be 1 day no charge submitted: court resolution on registration in the registry, Certificate of the Identification and Statistic number and Form JS 3100. Agency: Tax administration Adopt and publish a rule book on matters of salary, work organization, discipline, and other employee regulations. The procedure applies to employers who hire more than 15 workers. The company’s body authorized to issue internal regulations shall pass 1 day no charge 12 these rulebooks and does not have to submit them anywhere. Agency: Labor Department * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Procedures in light blue for married women only. Doing Business 2017 Bosnia and Herzegovina 27 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 excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records all procedures required for a Obtaining utility connections for water and business in the construction industry to build a sewerage warehouse along with the time and cost to complete Registering and selling the warehouse after its each procedure. In addition, the building quality completion control index evaluates the quality of building Time required to complete each procedure regulations, the strength of quality control and safety (calendar days) mechanisms, liability and insurance regimes, and professional certification requirements. Does not include time spent gathering information The ranking of economies on the ease of dealing with construction permits is determined by sorting their Each procedure starts on a separate day— though procedures that can be fully distance to frontier scores for dealing with completed online are an exception to this rule construction permits. These scores are the simple average of the distance to frontier scores for each of Procedure considered completed once final the component indicators. document is received To make the data comparable across economies, No prior contact with officials several assumptions about the construction Cost required to complete each procedure (% company, the warehouse project and the utility of warehouse value) connections are used. Official costs only, no bribes Assumptions about the construction company Building quality control index (0-15) The construction company (BuildCo): Sum of the scores of six component indices:  Is a limited liability company (or its legal Quality of building regulations (0-2) equivalent). Quality control before construction (0-1)  Operates in the economy’s largest business city. For 11 economies the data are also collected for Quality control during construction (0-3) the second largest business city. Quality control after construction (0-3)  Is 100% domestically and privately owned. Liability and insurance regimes (0-2)  Has five owners, none of whom is a legal entity. Professional certifications (0-4)  Is fully licensed and insured to carry out construction projects, such as building warehouses.  Has 60 builders and other employees, all of them nationals with the technical expertise and Doing Business 2017 Bosnia and Herzegovina 28 professional experience necessary to obtain  Is valued at 50 times income per capita. construction permits and approvals.  Will be a new construction (there was no previous  Has a licensed architect and a licensed engineer, construction on the land), with no trees, natural both registered with the local association of water sources, natural reserves or historical architects or engineers. BuildCo is not assumed monuments of any kind on the plot. to have any other employees who are technical  Will have complete architectural and technical plans or licensed experts, such as geological or prepared by a licensed architect. If preparation of topographical experts. the plans requires such steps as obtaining further  Has paid all taxes and taken out all necessary documentation or getting prior approvals from insurance applicable to its general business external agencies, these are counted as procedures. activity (for example, accidental insurance for  Will include all technical equipment required to be construction workers and third-person liability). fully operational.  Owns the land on which the warehouse will be  Will take 30 weeks to construct (excluding all delays built and will sell the warehouse upon its due to administrative and regulatory requirements). completion. Assumptions about the warehouse Assumptions about the utility connections The warehouse: The water and sewerage connections:  Will be used for general storage activities, such as storage of books or stationery. The warehouse  Will be 150 meters (492 feet) from the existing will not be used for any goods requiring special water source and sewer tap. If there is no water conditions, such as food, chemicals or delivery infrastructure in the economy, a borehole pharmaceuticals. will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be  Will have two stories, both above ground, with a installed or built. total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor  Will not require water for fire protection reasons; a will be 3 meters (9 feet, 10 inches) high. fire extinguishing system (dry system) will be used instead. If a wet fire protection system is required  Will have road access and be located in the by law, it is assumed that the water demand periurban area of the economy’s largest business specified below also covers the water needed for city (that is, on the fringes of the city but still fire protection. within its official limits). For 11 economies the data are also collected for the second largest  Will have an average water use of 662 liters (175 business city. gallons) a day and an average wastewater flow of 568 liters (150 gallons) a day. Will have a peak  Will not be located in a special economic or water use of 1,325 liters (350 gallons) a day and a industrial zone. peak wastewater flow of 1,136 liters (300 gallons) a  Will be located on a land plot of approximately day. 929 square meters (10,000 square feet) that is  Will have a constant level of water demand and 100% owned by BuildCo and is accurately wastewater flow throughout the year. registered in the cadastre and land registry.  Will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Doing Business 2017 Bosnia and Herzegovina 29 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build in the largest business city of an economy, except for 11 a warehouse in Bosnia and Herzegovina? According to economies for which the data are a population-weighted data collected by Doing Business, dealing with average of the 2 largest business cities. See the chapter construction permits there requires 15.0 procedures, on distance to frontier and ease of doing business takes 179.0 days and costs 18.5% of the warehouse value ranking at the end of this profile for more details. (figure 3.1). Most indicator sets refer to a case scenario Figure 3.1 What it takes to comply with formalities to build a warehouse in Bosnia and Herzegovina Source: Doing Business database. 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. . Doing Business 2017 Bosnia and Herzegovina 30 DEALING WITH CONSTRUCTION PERMITS Globally, Bosnia and Herzegovina stands at 170 in the provide other useful information for assessing how easy ranking of 190 economies on the ease of dealing with it is for an entrepreneur in Bosnia and Herzegovina to construction permits (figure 3.2). The rankings for legally build a warehouse. comparator economies and the regional average ranking Figure 3.2 How Bosnia and Herzegovina and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 31 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while compliance costs reasonable, governments around the making compliance easy and accessible to all. Coherent world have worked on consolidating permitting and transparent rules, efficient processes and adequate requirements. What construction permitting reforms has allocation of resources are especially important in sectors Doing Business recorded in Bosnia and Herzegovina where safety is at stake. Construction is one of them. In (table 3.1)? an effort to ensure building safety while keeping Table 3.1 How has Bosnia and Herzegovina made dealing with construction permits easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Bosnia and Herzegovina made dealing with construction DB2012 permits easier by fully digitizing and revamping its land registry and cadastre. Source: Doing Business database. 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. Doing Business 2017 Bosnia and Herzegovina 32 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Bosnia and BUILDING A WAREHOUSE Herzegovina are based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Estimated value of Doing Business through information collected from BAM 373,935 warehouse : experts in construction licensing, including architects, civil engineers, construction lawyers, construction City : Sarajevo firms, utility service providers and public officials who deal with building regulations. These procedures are those that apply to a company and The procedures, along with the associated time and cost, structure matching the standard assumptions used are summarized below. by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in Bosnia and Herzegovina Time to No. Procedure Cost to complete complete Obtain excerpt from the cadastre plan showing status of the land plot To obtain a copy of the cadastre plan, BuildCo must submit a request form which is available at the Municipality. Due to internal reorganization and automation of the process in the 1 day BAM 10 1 Cadastre Department of the Municipality, the process can be completed in 1 day. Agency: Municipality (Cadastre Department) Obtain excerpt from the land registry book showing proper registration The excerpt is available from the Land Registry Department of the Municipal Court. The company representative must take a queue number at the office counter in the morning and make a 1 day BAM 5 *2 written or oral request. The excerpt will be provided on the same day (usually within 1 hour). Agency: Municipal Court (Land Registry Department) Obtain urban planning consent BuildCo submits a request to the Municipality for an urban planning consent with the following required documents: • Reason for the request, including the project data and 30 days BAM 30 3 documentation required for the Urban Planning Department’s assessment • Program sketch • Preliminary (or first draft) project design, two examples (or depending on the level of construction complexity, project Doing Business 2017 Bosnia and Herzegovina 33 Time to No. Procedure Cost to complete complete proposal or program sketch) • General schemes for power installations, heating installations, fire prevention and security systems, water supply and sewage systems • Excerpt from the cadastre plan, showing right to build and ownership of plot (not older than 6 months) • Excerpt from the land registry book, showing proper registration • Environmental consent, if requested • Other data, if requested • For insurance purposes, consent for fire and explosion protection, issued by a competent company • Consent for the heating installations, issued by a competent company Once issued, the urban planning consent is effective for one year, during which time BuildCo may submit a construction permit request. Agency: Municipality (Urban Planning Department) Obtain preliminary verification of water supply and sewage system projects Once the urban planning consent is issued, BuildCo must submit the description of the main project plan to the municipal water 28 days BAM 117 4 and sewage authority (Vodovod i Kanalizacija). Agency: Vodovod i Kanalizacije Obtain preliminary verification of the study on fire and explosion prevention BuildCo must submit electronically the description of the main project plan to the Public Institute for Fire Protection, an 4 days BAM 150 *5 independent agency. Agency: Public Institute for Fire Protection Obtain validation of the technical audit of the main project Once the preliminary verification of the study on fire prevention and explosion is obtained, BuildCo must undergo a technical audit, showing that the project was designed in compliance with the urban permit and the provisions of the Law on Spatial 6 Planning. The auditing entity must have at least one engineer 5 days BAM 28,180 who passed the state exam and has 5 years of experience. The signature of an authorized auditor is required to confirm that the project has been revised in its entirety. The total fee for technical audits varies across municipalities, according to Municipal Decisions on the Fee Schedule for the Technical Audit of Construction. The above-stated fee applies to the Sarajevo Doing Business 2017 Bosnia and Herzegovina 34 Time to No. Procedure Cost to complete complete Municipality. Agency: Auditing Entity Pay the rent fee and shelter construction fee at a commercial bank The rent fee and shelter construction fee are paid at a commercial bank to the account of the Municipality's Urban 1 day BAM 32,092 *7 Planning Department. Agency: Municipality (Construction Department) Apply for building permit Once the fees are paid, the company must submit a request to the Urban Planning Department with the following documents: • Valid urban planning consent • Cadastre excerpt: land plot and proof of right to build • Proof of payment for purchase of the construction land • Proof of rent payments for the paid rent compensation • Consents obtained during the issuing of the urban planning permit 8 • Consent for stated building; any other enclosures as requested 30 days no charge by the authorities • Verified development project (two copies) and consents for the project documentations (Project Books 1 and 2, including the preliminary verifications applied for in Procedures 4 to 7) There is no fee associated with the application. Agency: Municipality (Urban Planning Department) Request marking out of the land plot The request for marking out the land plot must be submitted to the Municipality's Urban Planning Department with the construction permit and the urban planning consent. The municipal authorities mark out the land plot. The request fee 7 days BAM 15 9 depends on the annual municipal pricing decisions and on the on-site assessment. An average price is BAM 15.00. Agency: Municipality (Urban Planning Department) Notify the Municipality about the commencement of works Once the marking out of the land plot is complete, BuildCo must 10 notify the Municipality's Urban Planning Department of the start 1 day no charge of construction no later than 8 days before work begins. Agency: Municipality Doing Business 2017 Bosnia and Herzegovina 35 Time to No. Procedure Cost to complete complete Request water and sewage connection BuildCo must contact the municipal water and sewage authority (Vodovod i Kanalizacije) to obtain water and sewage connection. The request should include the preliminary verification and 30 days BAM 500 11 Project Books 1 and 2. Agency: Vodovod i Kanalizacije Receive technical inspection from the Municipality No later than the inspection date, BuildCo must present the following documentation to the Board: • Excerpt from the Commercial Court Register, showing that BuildCo is properly registered • Details on the each work phase of the construction • Building permit (copy) • Performance reports verified by the designer of the main project plan to validate compliance with the main project plan as well as terms and conditions specified in the building permit • Construction diary and construction book • Proof of testing the quality of materials and equipment received from suppliers at the time of purchase • Construction mark-out plan and minutes on the performed mark out * 12 • Construction-site organization scheme 1 day no charge • Decision on the appointed construction engineers and the supervisors • Cadastre plan The relevant municipal department must appoint an independent professional inspection board for a technical inspection within 15 days of receiving the duly submitted request for issuance of an occupancy permit. The number of board members appointed depends on the type and the complexity of the building; the board will consist of one professional for each type of construction work to be inspected (architectural/engineering, electrical, mechanical, water and sewage system, and so forth). Agency: Municipality (Urban Planning Department) Request occupancy permit After the technical review of completed construction, BuildCo 30 days BAM 7,804 13 must submit a request for the occupancy permit and include the following documents: • Building permit (copy) Doing Business 2017 Bosnia and Herzegovina 36 Time to No. Procedure Cost to complete complete • Cadastre plan (copy), including an exact plan of the marked final building position • Written statements from each contractor, stating the work has been properly performed according to the project design and future maintenance plans • A written report (by the construction supervisor) that all materials were of standard quality (certified as such by the suppliers) BuildCo submits these documents to the Urban Planning Department of the relevant municipality (the same municipal department that issued the building permit). The occupancy permit is issued upon completion of the technical inspection. It is only after the issuance of the occupancy permit that the building may be used. Agency: Municipality (Urban Planning Department) Register the building with the Municipality's Cadastre Department BuildCo must submit a request to register the building in the cadastre books at the Municipality's Cadastre Department. Along with the request, BuildCo must submit the occupancy permit, the building permit, the certificate proving the marking out of the property construction site and other documents showing ownership over the property. During the technical review of the completed construction, the designated authority checks whether there have been any 15 days BAM 180 14 additional changes in the construction and whether the construction was built in accordance with the urban planning consent. If there were any changes, then it would be necessary to obtain a new geodetic image of the plot. Upon registration of the property in the cadastre records, the cadastre forwards an extract to the Land Registry, which will ensure that the property gets registered in the land registry books. Agency: Municipality (Cadastre Department) Register the building with the Land Registry Department at the District Court of Sarajevo BuildCo must submit a request to register the warehouse in the land registry books at the District Court of Sarajevo. The request form can be found in the Land Registry Department. 1 day BAM 30 15 Other required documents include: • Purchasing agreement or other document as a proof of building and land ownership • Occupancy permit • Rent and shelter fee payment certificate Doing Business 2017 Bosnia and Herzegovina 37 Time to No. Procedure Cost to complete complete BuildCo must pay BAM 60.00 for administrative expenses The Land Registry Department will register the property upon receiving the excerpt from the cadastre. Agency: Land Registry Department at the District Court Sarajevo * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Doing Business 2017 Bosnia and Herzegovina 38 DEALING WITH CONSTRUCTION PERMITS Building Quality Control Index The building quality control index is the sum of the The index ranges from 0 to 15, with higher values scores on the quality of building regulations, quality indicating better quality control and safety mechanisms in control before construction, quality control during the construction permitting system. construction, quality control after construction, The indicator is based on the same case study liability and insurance regimes, and professional assumptions as the measures of efficiency. certifications indices. Table 3.3 Summary of quality control and safety mechanisms in Bosnia and Herzegovina Answer Score Building quality control index (0-15) 13.0 Which third-party entities are required by law to verify that the Licensed architect; building plans are in compliance with existing building Licensed engineer. regulations? (0-1) Quality of building regulations index (0-2) 2.0 Available online; Free of How accessible are building laws and regulations in your charge; In official 1.0 economy? (0-1) gazette. List of required Which requirements for obtaining a building permit are clearly documents; Fees to be specified in the building regulations or on any accessible website, 1.0 paid; Required brochure or pamphlet? (0-1) preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the Licensed architect; building plans are in compliance with existing building 1.0 Licensed engineer. regulations? (0-1) Quality control during construction index (0-3) 2.0 Inspections by in-house engineer; No What types of inspections (if any) are required by law to be inspections are legally 1.0 carried out during construction? (0-2) required during construction. Mandatory inspections Do legally mandated inspections occur in practice during are always done in 1.0 construction? (0-1) practice. Quality control after construction index (0-3) 3.0 Yes, final inspection is done by government Is there a final inspection required by law to verify that the agency; Yes, in-house building was built in accordance with the approved plans and 2.0 engineer submits regulations? (0-2) report for final inspection. Final inspection always Do legally mandated final inspections occur in practice? (0-1) 1.0 occurs in practice. Doing Business 2017 Bosnia and Herzegovina 39 Answer Score Liability and insurance regimes index (0-2) 1.0 Which parties (if any) are held liable by law for structural flaws or Architect or engineer; problems in the building once it is in use (Latent Defect Liability 1.0 Construction company. or Decennial Liability)? (0-1) Which parties (if any) are required by law to obtain an insurance No party is required by policy to cover possible structural flaws or problems in the law to obtain insurance 0.0 building once it is in use (Latent Defect Liability Insurance or . Decennial Insurance)? (0-1) Professional certifications index (0-4) 4.0 Minimum number of years of experience; What are the qualification requirements for the professional University degree in responsible for verifying that the architectural plans or drawings 2.0 architecture or are in compliance with existing building regulations? (0-2) engineering; Passing a certification exam. Minimum number of years of experience; University degree in What are the qualification requirements for the professional who engineering, 2.0 supervises the construction on the ground? (0-2) construction or construction management; Passing a certification exam. Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 40 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity connection a customer is always to gain access by obtaining a (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, Obtaining external installation works and as well as the time and cost to complete them. These possibly purchasing material for these works procedures include applications and contracts with Concluding any necessary supply contract and electricity utilities, clearances from other agencies obtaining final supply and the external and final connection works. In addition, Doing Business also measures the reliability Time required to complete each procedure of supply and transparency of tariffs index (included (calendar days) in the aggregate distance to frontier score and Is at least 1 calendar day ranking on the ease of doing business) and the price Each procedure starts on a separate day of electricity (omitted from these aggregate measures). The ranking of economies on the ease of Does not include time spent gathering getting electricity is determined by sorting their information distance to frontier scores for getting electricity. Reflects the time spent in practice, with little These scores are the simple average of the distance follow-up and no prior contact with officials to frontier scores for each of the component Cost required to complete each procedure (% indicators. To make the data comparable across of income per capita) economies, several assumptions are used. Official costs only, no bribes Assumptions about the warehouse Excludes value added tax The warehouse: The reliability of supply and transparency of  Is owned by a local entrepreneur. tariffs index  Is located in the economy’s largest business city. Sum of the scores of six component indices: For 11 economies the data are also collected for Duration and frequency of outages the second largest business city. Tools to monitor power outages  Is located in an area where similar warehouses Tools to restore power supply are typically located. In this area a new electricity connection is not eligible for a special investment Regulatory monitoring of utilities’ performance promotion regime (offering special subsidization Financial deterrents aimed at limiting outages or faster service, for example). Transparency and accessibility of tariffs  Is located in an area with no physical constraints. Price of electricity (cents per kilowatt-hour)* For example, the property is not near a railway. Price based on monthly bill for commercial  Is a new construction and is being connected to warehouse in case study electricity for the first time. *Price of electricity is not included in the calculation of distance to frontier nor ease of doing business ranking Doing Business 2017 Bosnia and Herzegovina 41 The warehouse (continued): Assumptions about the monthly consumption  Has two stories, both above ground, with a total  It is assumed that the warehouse operates 30 days surface area of approximately 1,300.6 square a month from 9:00 a.m. to 5:00 p.m. (8 hours a day), meters (14,000 square feet). The plot of land on with equipment utilized at 80% of capacity on which it is built is 929 square meters (10,000 average and that there are no electricity cuts square feet). (assumed for simplicity reasons).  Is used for storage of goods.  The monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 Assumptions about the electricity connection kWh. The electricity connection:  If multiple electricity suppliers exist, the warehouse  Is a permanent one. is served by the cheapest supplier.  Is a three-phase, four-wire Y connection with a  Tariffs effective in March of the current year are subscribed capacity of 140-kilo-volt-ampere used for calculation of the price of electricity for the (kVA) with a power factor of 1, when 1 kVA = 1 warehouse. Although March has 31 days, for kilowatt (kW). calculation purposes only 30 days are used.  Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution network and is either overhead or underground, whichever is more common in the area where the warehouse is located  Requires works that involve the crossing of a 10- meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.  Includes only a negligible length in the customer’s private domain.  Does not require work to install the internal wiring of the warehouse. This has already been completed up to and including the customer’s service panel or switchboard and the meter base. Doing Business 2017 Bosnia and Herzegovina 42 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection Most indicator sets refer to a case scenario in the largest in Bosnia and Herzegovina? According to data collected business city of an economy, except for 11 economies for by Doing Business, getting electricity there requires 8.0 which the data are a population-weighted average of the procedures, takes 125.0 days and costs 400.2% of 2 largest business cities. See the chapter on distance to income per capita (figure 4.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 4.1 What it takes to obtain an electricity connection in Bosnia and Herzegovina Source: Doing Business database. 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. Doing Business 2017 Bosnia and Herzegovina 43 GETTING ELECTRICITY Globally, Bosnia and Herzegovina stands at 123 in the another perspective in assessing how easy it is for an ranking of 190 economies on the ease of getting entrepreneur in Bosnia and Herzegovina to connect a electricity (figure 4.2). The rankings for comparator warehouse to electricity. economies and the regional average ranking provide Figure 4.2 How Bosnia and Herzegovina and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 44 GETTING ELECTRICITY What are the details? The indicators reported here for Bosnia and Herzegovina OBTAINING AN ELECTRICITY CONNECTION* are based on a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility— Name of utility: JP Elektroprivreda BiH identified by Doing Business. Data are collected from the distribution utility, then completed and verified by Price of electricity electricity regulatory agencies and independent (US cents per kWh): 11.8 professionals such as electrical engineers, electrical contractors and construction companies. The electricity City: Sarajevo distribution utility surveyed is the one serving the area (or areas) in which warehouses are located. If there is a *Price is calculated as a monthly consumption of 26,880 kWh choice of distribution utilities, the one serving the largest for business customers, based on a standardized case study number of customers is selected. adopted by the getting electricity methodology. Doing Business measures the price of electricity but does not include these The procedures are those that apply to a warehouse and data when calculating the distance to frontier score for getting electricity connection matching the standard electricity or the ranking on the ease of getting electricity. assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 4.2 Summary of time, cost and procedures for getting electricity in Bosnia and Herzegovina Time to No. Procedure Cost to complete complete Obtain initial electric power permit from Elektroprivreda BiH The customer has to go to the utility and request the issuance of initial electric power permit which are basic technical conditions to check if the requested capacity is available and if there is a possible collision with 1 existing users. Documents required are: cadastre extract, urban planning 30 calendar days BAM 30 consent in certified copies and a rough design. Agency: JP Elektroprivreda BiH Request electro-energetic consent from Elektroprivreda BiH The customer has to request the issuance of electro-energetic consent at the utility. The purpose is to specify more detailed technical conditions for the electricity connection. Documents required are: Building permit, 2 company registration and schemes of electrical installation (project plan). 23 calendar days BAM 50 . Agency: JK Elektroprivreda BiH Doing Business 2017 Bosnia and Herzegovina 45 Time to No. Procedure Cost to complete complete Receive external site inspection by Elektroprivreda BiH An authorized person of the customer has to be present during the site inspection to agree with the utility on the location of the facilities (cables etc). After the site visit, the electro-energetic consent and the estimate of 10 calendar days BAM 0 *3 costs are sent to the customer. Agency: JK Elektroprivreda BiH Receive electro-energetic consent, submit connection application, pay estimate and sign contract The client has to go to the utility's main building to submit the application for connection after having received the electro-energetic 30 calendar days BAM 0 4 consent. The client pays the estimate and signs the connection contract. Agency: JK Elektroprivreda BiH Await and receive external works from Elektroprivreda BiH The utility is planning and executing the external connection works. Once the works are completed, the utility will energize the connection and install the meter. The utility needs to request an excavation permit from 31 calendar days BAM 27,300 5 the municipality to execute the external works. Agency: JP Elektroprivreda BiH Hire electrician to issue certificate of compliance for internal wiring After the external connection works, the client hires a specialized electrician to issue a certificate of compliance for the internal wiring of 6 the warehouse. 8 calendar days BAM 2,550 Agency: Specialized electrician Receive site visit by municipal commission A commission for an external joint site inspection is organized by the municipality. This procedure is not applicable to low-voltage cables, but for medium-voltage cases it is required. After the site visit, the *7 commission drafts a protocol. A cost is levied for the external 1 calendar day BAM 0 connection, and the amount depends on the estimated value of the facility. The land surveyor of the municipality who is part of the commission will request the certificate issued by the Institute for Construction of the Canton Sarajevo proving that the cables have been recorded in the cadaster, as well as the elaboration of implemented Doing Business 2017 Bosnia and Herzegovina 46 Time to No. Procedure Cost to complete complete surveying works produced by the private land surveying company. The customer should be present during this visit. Agency: Municipality Receive visit by Elektroprivreda BiH to energize the connection Once the works are completed and after the site visit of the commission of the municipality, an authorized person from the utility will come and energize the connection. At the same time, the meter installed by the 8 private electrical contractor hired by the utility, will also be inspected and 3 calendar days BAM 0 sealed. Agency: JP Elektroprivreda BiH * Takes place simultaneously with previous procedure. Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 47 GETTING ELECTRICITY Reliability of supply and transparency of tariffs index The reliability of supply and transparency of tariffs Doing Business uses the system average interruption index encompasses quantitative data on the duration duration index (SAIDI) and the system average and frequency of power outages as well as interruption frequency index (SAIFI) to measure the qualitative information on the mechanisms put in duration and frequency of power outages in the largest place by the utility for monitoring power outages business city of each economy (for 11 economies the data and restoring power supply, the reporting are also collected for the second largest business city). relationship between the utility and the regulator for SAIDI is the average total duration of outages over the power outages, the transparency and accessibility of course of a year for each customer served, while SAIFI is tariffs and whether the utility faces a financial the average number of service interruptions experienced deterrent aimed at limiting outages (such as a by a customer in a year. Annual data (covering the requirement to compensate customers or pay fines calendar year) are collected from distribution utility when outages exceed a certain cap). companies and national regulators on SAIDI and SAIFI. Both SAIDI and SAIFI estimates include load shedding. The index ranges from 0 to 8, with higher values indicating greater reliability of electricity supply and greater transparency of tariffs. Table 4.3 Reliability of Supply and Transparency of Tariff Index in Bosnia and Herzegovina Answer Score Reliability of supply and transparency of tariff index (0-8) 6.0 Total duration and frequency of outages per customer a year (0-3) 2.0 System average interruption duration index (SAIDI) 2.76 System average interruption frequency index (SAIFI) 0.81 Mechanisms for monitoring outages (0-1) 1.0 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1.0 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1.0 Does a regulator—that is, an entity separate from the utility—monitor Yes the utility’s performance on reliability of supply? Financial deterrents aimed at limiting outages (0-1) 0.0 Does the utility either pay compensation to customers or face fines by No the regulator (or both) if outages exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1.0 Are effective tariffs available online? Yes Link to the website, if available online http://www.elektr Doing Business 2017 Bosnia and Herzegovina 48 Answer Score oprivreda.ba/eng /page/calculator Are customers notified of a change in tariff ahead of the billing cycle? Yes Price of electricity (US cents per kWh) 11.8 Source: Doing Business database. Note: If data on power outages is not collected or if the SAIFI index or SAIDI index are above the threshold of 100, the economy is not eligible to obtain a score in the Reliability of Supply and Transparency of Tariff Index. If SAIDI and SAIFI are 12 (equivalent to an outage of one hour each month) or below, a score of 1 is assigned. If SAIDI and SAIFI are 4 (equivalent to an outage of one hour each quarter) or below, 1 additional point is assigned. Finally, if SAIDI and SAIFI are 1 (equivalent to an outage of one hour per year) or below, 1 more point is assigned. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. The price of electricity is measured in cents per kilowatt-hour. On the basis of the assumptions about monthly consumption, a monthly bill for a commercial warehouse in the largest business city of the economy is computed for the month of March. As noted, the warehouse uses electricity 30 days a month, from 9:00 a.m. to 5:00 p.m., so different tariff schedules may apply if a time-of-use tariff is available. Doing Business 2017 Bosnia and Herzegovina 49 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 accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. In (calendar days) addition, Doing Business also measures quality of Does not include time spent gathering the land administration system in each economy. information The ranking of economies on the ease of registering property is determined by sorting their distance to Each procedure starts on a separate day— frontier scores for registering property. These scores though procedures that can be fully completed online are an exception to this rule are the simple average of the distance to frontier scores for each of the component indicators. To Procedure considered completed once final make the data comparable across economies, document is received several assumptions about the parties to the No prior contact with officials transaction, the property and the procedures are used. Cost required to complete each procedure (% of property value) The parties (buyer and seller): Official costs only, no bribes  Are limited liability companies, 100% domestically and privately owned and perform No value added or capital gains taxes included general commercial activities in the economy’s Quality of land administration index (0-30) largest business city.  Have 50 employees each, all of whom are  Has no mortgages attached, has been under the nationals. same ownership for the past 10 years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square feet)  Has a value of 50 times income per capita. The of land and a 10-year-old, 2-story warehouse of 929 sale price equals the value and entire property square meters (10,000 square feet). The warehouse is will be transferred. in good condition and complies with all safety  Is registered in the land registry or cadastre, or standards, building codes and legal requirements. both, and is free of title disputes. There is no heating system.  Is located in a periurban commercial zone, and no rezoning is required. Doing Business 2017 Bosnia and Herzegovina 50 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest Bosnia and Herzegovina? According to data collected by business city of an economy, except for 11 economies for Doing Business, registering property there requires 7.0 which the data are a population-weighted average of the procedures, takes 24.0 days and costs 5.2% of the 2 largest business cities. See the chapter on distance to property value (figure 5.1). The score on the quality of frontier and ease of doing business ranking at the end of land administration index is 12.5 this profile for more details. Figure 5.1 What it takes to register property in Bosnia and Herzegovina Source: Doing Business database. 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. Doing Business 2017 Bosnia and Herzegovina 51 REGISTERING PROPERTY Globally, Bosnia and Herzegovina stands at 99 in the other useful information for assessing how easy it is for ranking of 190 economies on the ease of registering an entrepreneur in Bosnia and Herzegovina to transfer property (figure 5.2). The rankings for comparator property. economies and the regional average ranking provide Figure 5.2 How Bosnia and Herzegovina and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 52 REGISTERING PROPERTY Economies worldwide have been making it easier for the time required substantially—enabling buyers to use entrepreneurs to register and transfer property—such as or mortgage their property earlier. What property by computerizing land registries, introducing time limits registration reforms has Doing Business recorded in for procedures and setting low fixed fees. Many have cut Bosnia and Herzegovina (table 5.1)? Table 5.1 How has Bosnia and Herzegovina made registering property easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Bosnia and Herzegovina reduced delays in property DB2011 registration at the land registry in Sarajevo. Bosnia and Herzegovina made it easier to transfer property DB2013 between companies by computerizing the commercial registry. Source: Doing Business database. 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. Doing Business 2017 Bosnia and Herzegovina 53 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 lawyers, Property value: BAM 373,935 notaries and property registries. These procedures are those that apply to a transaction matching the City: Sarajevo standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in Bosnia and Herzegovina Time to No. Procedure Cost to complete complete Obtain the land registry extract as proof of ownership The seller requests and obtains the land registry excerpt from a competent court land registry office as the proof of ownership and to check the property against encumbrances. In practice, the excerpt must 1 day be obtained by the seller before starting the transaction formally. This (simultaneous BAM 5 1 information need to be obtained in hard copy and be sealed to have with Procedure 2) legal validity. The seller may hire a lawyer to perform this task. Agency: Municipal Court in Sarajevo (Land Registry Office) Parties obtain the court extract certifying that company representatives are authorized to act on behalf of each company Both the seller and the buyer submit the request for obtaining the court extract certifying the person authorized to act on behalf of each BAM 5 (each company to the court that keeps the Registry of Commercial Companies. 5 days request) + BAM 10 *2 They may hire a lawyer to perform this task. The parties have to provide (simultaneous per page (Court the set of registration documents, which prove that the person who will with Procedure 1) Extract, about 4-5 sign on behalf of the company is authorized to do it. pages each) Agency: Municipal Court in Sarajevo (Companies Registry) Notarization of sale-purchase agreement The law on Notary of the Federal Republic of Bosnia & Herzegovina that 3 passed in 2002 and became applicable in May 2007 prescribes notaries 1 day 500 BAM as the competent authority in the process of transferring a real estate or acquiring the ownership rights over the same or other real rights. According to the law, the purchase agreement of the real estate must be Doing Business 2017 Bosnia and Herzegovina 54 Time to No. Procedure Cost to complete complete prepared as a notary deed. The cost of the procedure of notarization of the sale-purchase agreement depends on the value of the real estate at the time of purchase. Parties provide the notary with the land registry excerpt (obtained in Procedure 1) and well as with a court excerpt (obtained in Procedure 2). The presence of both parties is necessary at the notary's office or verification of the signatures should be based on a special power of notary. The notary needs to be provided with the following documents: (1) The land registry excerpt as well as the copy of the cadastre plan proving the ownership over the property; (2) The extract from the company’s court registry certifying the person is authorized to act on behalf on the company and to sign the purchase agreement; (3) The approval of the founder (i.e. the General Assembly or Supervisory Board if applicable) for selling the property in case that the value of the property exceeds the amount of 1/3 of the company’s book value. New Notary Tariff has been passed on July 2013 (and replace previous one No. 71/07) and the same effected to the decresing of cost of notarization of sale-purchase agreement New Tariff of Notary Fees and Compensations has been passed on July 24, 2013 and published in Official Gazzete of FB&H No. 57/13 and the same in general decresed the notary fees and compensations. Thus, the notary fee depends on the value of the property and will be calculated as follows: Value of property notary fees in BAM above BAM to BAM 0 5.000,00 200,00 BAM 5.000,00 50.000,00 270,00 BAM 50.000,00 100.000,00 350,00 BAM When the value of the subject of a legal transaction or other official action is over 100,000 BAM, notary is, besides the fee of 350,00 BAM, obliged to charge an additional fee of 50,00 BAM for every started 100.000,00 BAM in the part in which the value of the official action exceeds 100.000,00 BAM, but in the amount not greater than 2.000,00 BAM. Agency: Notary Submit the request for an evaluation of the property for tax purposes Parties file the request for the evaluation of the real estate regarding the 4 payment of the tax for the transfer of the ownership on real estates at 1 day no cost the competent municipal Tax Authority. The deadline for filing the request is 15 days from the verification of signatures on the sale agreement. This Procedure can be done by a lawyer or by the buyer and/or the seller. The documentation shall include a copy of sale Doing Business 2017 Bosnia and Herzegovina 55 Time to No. Procedure Cost to complete complete contract (obtained after Procedure 3). Agency: Municipal Tax Authority On-site inspection of a property Upon submission of the purchase agreement the tax office commission performs on-site inspection of the real estate and takes notes from that inspection. Based on the notes, the tax office adopts an official decision 5-15 days no cost 5 on tax duty of the tax payer (in practice it is always the buyer). Agency: Tax Office Commission Payment of transfer tax at the commercial bank The transfer tax is paid, usually by the buyer, at a commercial bank in favor of the municipal budget. Following an amendment to the Law on Transfer Tax of the Real Estates and Rights as published in the Official Gazette of Canton Sarajevo on March 31st, 2005, the transfer tax of 5% 5% of property 6 came into effect on April 8th, 2005. The tax has to be paid according to 1 day value (transfer tax) the tax authority's instructions within 15 days from receiving payment instructions from the tax authority. Agency: Commercial Bank Apply for registration at the Land Registry Parties submit the application and other documentation for the transfer of the ownership to the competent court land registry office. The registration of the transfer of ownership is handled by the authorized court officer. Time length of the Procedure is not prescribed by the law. However, the Procedure can last less than indicated above in case the party sends the urgency letter, especially in case of larger investments, explaining the grounds for such urgency, which happens often in practice. Computerization efforts at the Municipal Court in the past years have significantly sped up the process of registration. Registry is now BAM 30 7 3-9 days completely computerized and all data on companies are now stored in electronic form, so issuing of the court extract requires only printing of already stored data on concrete company. The land registry will forward information to the Cadastre. The documentation shall include: (1) Purchase agreement (2) Certificate of tax payment Agency: Municipal Court of Sarajevo (Land Registry Office) Doing Business 2017 Bosnia and Herzegovina 56 Time to No. Procedure Cost to complete complete * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Doing Business 2017 Bosnia and Herzegovina 57 REGISTERING PROPERTY Quality of land administration The quality of land administration index is the sum of If private sector entities were unable to register property the scores on the reliability of infrastructure, transfers in an economy between June 2015 and June transparency of information, geographic coverage, 2016, the economy receives a “no practice” mark on the land dispute resolution and equal access to property procedures, time and cost indicators. A “no practice” rights indices. economy receives a score of 0 on the quality of land administration index even if its legal framework includes The index ranges from 0 to 30, with higher values provisions related to land administration. indicating better quality of the land administration system. Table 5.3 Summary of quality of land administration in Bosnia and Herzegovina Answer Score Quality of the land administration index (0-30) 12.5 Reliability of infrastructure index (0-8) 4.0 Municipal Court What is the institution in charge of immovable property registration? Sarajevo-Land Registry Office In what format are the majority of title or deed records kept in the Computer/Scann largest business city—in a paper format or in a computerized format 1.0 ed (scanned or fully digital)? Is there an electronic database for checking for encumbrances (liens, Yes 1.0 mortgages, restrictions and the like)? In what format are the majority of maps of land plots kept in the Computer/Scann largest business city—in a paper format or in a computerized format 1.0 ed (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information (geographic information Yes 1.0 system)? Is the information recorded by the immovable property registration Separate agency and the cadastral or mapping agency kept in a single database, 0.0 databases in different but linked databases or in separate databases? Do the immovable property registration agency and cadastral or No 0.0 mapping agency use the same identification number for properties? Transparency of information index (0–6) 3.0 Who is able to obtain information on land ownership at the agency in Freely accessible 1.0 charge of immovable property registration in the largest business city? by anyone Is the list of documents that are required to complete any type of Yes, on public 0.5 property transaction made publicly available–and if so, how? boards Doing Business 2017 Bosnia and Herzegovina 58 Answer Score Link for online access: Is the applicable fee schedule for any property transaction at the Yes, on public agency in charge of immovable property registration in the largest 0.5 boards business city made publicly available–and if so, how? Link for online access: Does the agency in charge of immovable property registration commit to delivering a legally binding document that proves property Yes, in person 0.0 ownership within a specific time frame–and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that occurred at the agency in charge of immovable property No 0.0 registration? Contact information: Are there publicly available official statistics tracking the number of No 0.0 transactions at the immovable property registration agency? Number of property transfers in the largest business city in 2015: Freely accessible Who is able to consult maps of land plots in the largest business city? 0.5 by anyone Is the applicable fee schedule for accessing maps of land plots made Yes, online 0.5 publicly available—and if so, how? http://www.fgu.co Link for online access: m.ba/sr/492.html Does the cadastral or mapping agency commit to delivering an updated map within a specific time frame—and if so, how does it No 0.0 communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about No 0.0 a problem that occurred at the cadastral or mapping agency? Geographic coverage index (0–8) 0.0 Are all privately held land plots in the economy formally registered at No 0.0 the immovable property registry? Are all privately held land plots in the largest business city formally No 0.0 registered at the immovable property registry? Are all privately held land plots in the economy mapped? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Doing Business 2017 Bosnia and Herzegovina 59 Answer Score Land dispute resolution index (0–8) 5.5 Does the law require that all property sale transactions be registered at the immovable property registry to make them opposable to third Yes 1.5 parties? Is the system of immovable property registration subject to a state or Yes 0.5 private guarantee? Is there a specific compensation mechanism to cover for losses incurred by parties who engaged in good faith in a property transaction Yes 0.5 based on erroneous information certified by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., checking the compliance of Yes 0.5 contracts with requirements of the law)? Registrar; Notary; If yes, who is responsible for checking the legality of the documents? Lawyer. Does the legal system require verification of the identity of the parties Yes 0.5 to a property transaction? If yes, who is responsible for verifying the identity of the parties? Registrar; Notary. Is there a national database to verify the accuracy of identity No 0.0 documents? For a standard land dispute between two local businesses over tenure rights of a property worth 50 times gross national income (GNI) per The Municipal capita and located in the largest business city, what court would be in Court in Sarajevo charge of the case in the first instance? How long does it take on average to obtain a decision from the first- Between 1 and 2 2.0 instance court for such a case (without appeal)? years Are there any statistics on the number of land disputes in the first No 0.0 instance? Number of land disputes in the largest business city in 2015: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights Yes 0.0 to property? Do married men and married women have equal ownership rights to Yes 0.0 property? Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 60 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 to view and consider a potential borrower’s Strength of legal rights index (0–12) financial history (positive or negative) when assessing Rights of borrowers and lenders through risk and they allow borrowers to establish a good collateral laws credit history that will facilitate their access to credit. Protection of secured creditors’ rights through Sound collateral laws enable businesses to use their bankruptcy laws assets, especially movable property, as security to generate capital—while strong creditors’ rights have Depth of credit information index (0–8) been associated with higher ratios of private sector Scope and accessibility of credit information credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in largest lenders with respect to secured transactions through credit bureau as percentage of adult population 2 sets of indicators. The depth of credit information Credit registry coverage (% of adults) index measures rules and practices affecting the coverage, scope and accessibility of credit Number of individuals and firms listed in credit registry as percentage of adult population information available through a credit registry or a 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 two case scenarios, Case A and Case B, to determine the scope Has up to 50 employees. of the secured transactions system, involving a secured borrower and a secured lender and Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable The ranking of economies on the ease of getting credit collateral (for more details on each case, see the Data is determined by sorting their distance to frontier scores Notes section of the Doing Business 2017 report). for getting credit. These scores are the distance to These scenarios assume that the borrower: frontier score for the strength of legal rights index and Is a domestic limited liability company. the depth of credit information index. Has its headquarters and only base of operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2017 Bosnia and Herzegovina 61 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, Bosnia and Herzegovina stands at 44 in the and bankruptcy laws in Bosnia and Herzegovina facilitate ranking of 190 economies on the ease of getting credit access to credit? The economy has a score of 6.0 on the (figure 6.1). The rankings for comparator economies depth of credit information index and a score of 7.0 on provide other useful information for assessing how well the strength of legal rights index (see the summary of regulations and institutions in Bosnia and Herzegovina scoring at the end of this chapter for details). Higher support lending and borrowing. scores indicate more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Bosnia and Herzegovina and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 62 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for Bosnia and Herzegovina and shows the indicators into context is to see where the economy scores for comparator economies as well as the regional stands in the distribution of scores across economies. average score. Figure 6.3 shows the same for the depth Figure 6.2 highlights the score on the strength of legal of credit information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Source: Doing Business database. Source: Doing Business database. 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. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Doing Business 2017 Bosnia and Herzegovina 63 GETTING CREDIT When economies strengthen the legal rights of lenders information, they can increase entrepreneurs’ access to and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded increase the scope, coverage and accessibility of credit in Bosnia and Herzegovina (table 6.1)? Table 6.1 How has Bosnia and Herzegovina made getting credit easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Bosnia and Herzegovina made access to credit information DB2013 more difficult by stopping the private credit bureau’s collection of credit information on individuals. Source: Doing Business database. 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. Doing Business 2017 Bosnia and Herzegovina 64 GETTING CREDIT What are the details? The getting credit indicators reported here for Bosnia The data on the legal rights of borrowers and lenders are and Herzegovina are based on detailed information gathered through a survey of financial lawyers and collected in that economy. The data on credit verified through analysis of laws and regulations as well information sharing are collected through a survey of a as public sources of information on collateral and credit registry and/or credit bureau (if one exists). To bankruptcy laws. For the strength of legal rights index, a construct the depth of credit information index, a score score of 1 is assigned for each of 10 aspects related to of 1 is assigned for each of 8 features of the credit legal rights in collateral law and 2 aspects in bankruptcy registry or credit bureau (see summary of scoring below). law. Strength of legal rights index (0–12) Index score: 7.0 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents to security interests in movable 1 assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of 1 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 its 1 assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to 0 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 include a 1 maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is 1 unified geographically and by asset type, with an electronic database indexed by debtor's name? Can banks and financial institutions access borrowers’ credit information online (for example, 1 through a web interface, a system-to-system connection or both)? Does a modern collateral registry exist in which registrations, amendments, cancellations and 1 searches can be performed online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor 0 defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is 0 liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law protect secured creditors’ rights by 0 providing clear grounds for relief from the stay and/or sets a time limit for it? Doing Business 2017 Bosnia and Herzegovina 65 Strength of legal rights index (0–12) Index score: 7.0 Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell the collateral through public auction and 0 private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Depth of credit information index (0–8) Credit bureau Credit registry Index score: 6.0 Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - Yes No 1 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years Yes Yes 1 of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per Yes Yes 1 capita distributed? By law, do borrowers have the right to access their data No No 0 in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an online Yes Yes 1 platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions No No 0 assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 0 991,493 Number of firms 280,484 27,022 Total 280,484 1,018,515 Total percentage of adult population 10.4 37.6 Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 66 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of WHAT THE PROTECTING MINORITY companies to raise the capital they need to grow, innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require Extent of disclosure index (0–10) shareholder participation in major decisions of the Review and approval requirements for related-party company and set detailed standards of accountability transactions; Disclosure requirements for related-party for company insiders. transactions What do the indicators cover? Extent of director liability index (0–10) Ability of minority shareholders to sue and hold Doing Business measures the protection of minority interested directors liable for prejudicial related-party investors from conflicts of interest through one set of transactions; Available legal remedies (damages, indicators and shareholders’ rights in corporate disgorgement of profits, fines, imprisonment, rescission governance through another. The ranking of economies of the transaction) on the strength of minority investor protections is Ease of shareholder suits index (0–10) determined by sorting their distance to frontier scores Access to internal corporate documents; Evidence for protecting minority investors. These scores are the obtainable during trial and allocation of legal expenses simple average of the distance to frontier scores for the extent of conflict of interest regulation index and the Extent of conflict of interest regulation index (0– extent of shareholder governance index. To make the 10) data comparable across economies, a case study uses Simple average of the extent of disclosure, extent of several assumptions about the business and the director liability and ease of shareholder indices transaction. Extent of shareholder rights index (0-10) The business (Buyer): Shareholders’ rights and role in major corporate decisions  Is a publicly traded corporation listed on the Extent of ownership and control index (0-10) economy’s most important stock exchange. If the Governance safeguards protecting shareholders from number of publicly traded companies listed on that undue board control and entrenchment exchange is less than 10, or if there is no stock exchange in the economy, it is assumed that Buyer Extent of corporate transparency index (0-10) is a large private company with multiple Corporate transparency on ownership stakes, shareholders. compensation, audits and financial prospects Extent of shareholder governance index (0–10)  Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of Buyer Simple average of the extent of shareholders rights, extent of ownership and control and extent of corporate where permitted, even if this is not specifically transparency indices required by law. Strength of minority investor protection index (0–  Has a supervisory board (applicable to economies 10) with a two-tier board system) on which 60% of the Simple average of the extent of conflict of interest shareholder-elected members have been appointed regulation and extent of shareholder governance indices by Mr. James, who is Buyer’s controlling shareholder and a member of Buyer’s board of directors.  Has not adopted any bylaws or articles of association that differ from default minimum standards and does not follow any nonmandatory codes, principles, recommendations or guidelines Doing Business 2017 Bosnia and Herzegovina 67 relating to corporate governance.  Is a manufacturing company with its own distribution network. The transaction involves the following details:  Mr. James owns 60% of Buyer and elected two directors to Buyer’s five-member board.  Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores.  Mr. James proposes that Buyer pur chase Seller’s unused fleet of trucks to expand Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of Buyer’s assets and is higher than the market value.  The proposed transaction is part of the company’s ordinary course of business and is not outside the authority of the company.  Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made (that is, the transaction is not fraudulent).  The transaction causes damages to Buyer. Shareholders sue Mr. James and the other parties that approved the transaction. Doing Business 2017 Bosnia and Herzegovina 68 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against investor protection index (figure 7.1). While the indicator self-dealing in Bosnia and Herzegovina? The economy does not measure all aspects related to the protection of has a score of 5.5 on the strength of minority investor minority investors, a higher ranking does indicate that an protection index, with a higher score indicating stronger economy’s regulations offer stronger minority investor protections. protections against self-dealing in the areas measured. Globally, Bosnia and Herzegovina stands at 81 in the ranking of 190 economies on the strength of minority Figure 7.1 How Bosnia and Herzegovina and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 69 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the A summary of scoring for the protecting minority investors protecting minority investors indicators into context indicators at the end of this chapter provides details on is to see where the economy stands in the how the indices were calculated. distribution of scores across comparator economies. Figure 7.2 highlights the scores on the various minority investor protection indices for Bosnia and Herzegovina. Figure 7.2 Summary of the various minority investor protection indices for Bosnia and Herzegovina and comparator economies. Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 70 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported of conditions relating to disclosure, director liability, here for Bosnia and Herzegovina are based on detailed shareholder suits, shareholder rights, ownership and information collected through a survey of corporate and control and corporate transparency in a standard case securities lawyers about securities regulations, company study (for more details, see the Data Notes section of the laws and court rules of evidence and procedure. To Doing Business 2017 report). The summary below shows construct the six indicators on minority investor the details underlying the scores for Bosnia and protection, scores are assigned to each based on a range Herzegovina. Table 7.2 Summary of scoring for the protecting minority investors indicators in Bosnia and Herzegovina Answer Score Strength of minority investor protection index (0-10) 5.5 Extent of conflict of interest regulation index (0-10) 4.7 Extent of disclosure index (0-10) 3.0 Which corporate body is legally sufficient to approve the Board of directors excluding 2.0 Buyer-Seller transaction? (0-3) interested members Must Mr. James disclose his conflict of interest to the board Existence of a conflict without any 1.0 of directors? (0-2) specifics Must Buyer disclose the transaction in published periodic No disclosure obligation 0.0 filings (annual reports)? (0-2) Must Buyer immediately disclose the transaction to the No disclosure obligation 0.0 public and/or shareholders? (0-2) Must an external body review the terms of the transaction No 0.0 before it takes place? (0-1) Extent of director liability index (0-10) 6.0 Can shareholders representing 10% of Buyer's share capital sue directly or derivatively for the damage the transaction No 0.0 caused to Buyer? (0-1) Can shareholders hold the interested director liable for the Liable if negligent 1.0 damage the transaction caused to Buyer? (0-2) Can shareholders hold the other directors liable for the Liable if unfair or prejudicial 2.0 damage the transaction caused to Buyer (0-2) Must Mr. James pay damages for the harm caused to Buyer Yes 1.0 upon a successful claim by shareholders? (0-1) Must Mr. James repay profits made from the transaction Yes 1.0 upon a successful claim by shareholders? (0-1) Is Mr. James disqualifed or fined and imprisoned upon a Yes 1.0 successful claim by shareholders? (0-1) Can a court void the transaction upon a successful claim by Only in case of fraud or bad faith 0.0 shareholders? (0-2) Ease of shareholder suits index (0-10) 5.0 Before suing can shareholders representing 10% of Buyer's Yes 1.0 share capital inspect the transaction documents? (0-1) Can the plaintiff obtain any documents from the defendant Documents that the defendant 1.0 and witnesses at trial? (0-3) relied on Can the plaintiff request categories of documents from the No 0.0 Doing Business 2017 Bosnia and Herzegovina 71 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and Yes 2.0 witnesses at trial? (0-2) Is the level of proof required for civil suits lower than that of No 0.0 criminal cases? (0-1) Can shareholder plaintiffs recover their legal expenses from Yes if successful 1.0 the company? (0-2) Extent of shareholder governance index (0-10) 6.3 Extent of shareholder rights index (0-10) 7.0 Does the sale of 51% of Buyer's assets require shareholder Yes 1.0 approval? Can shareholders representing 10% of Buyer's share capital No 0.0 call for an extraordinary meeting of shareholders? Must Buyer obtain its shareholders’ approval every time it Yes 1.0 issues new shares? Do shareholders automatically receive preemption rights Yes 1.0 every time Buyer issues new shares? Must shareholders approve the election and dismissal of the Yes 1.0 external auditor? Are changes to the rights of a class of shares only possible if No 0.0 the holders of the affected shares approve? Assuming that Buyer is a limited company, does the sale of Yes 1.0 51% of its assets require member approval? Assuming that Buyer is a limited company, can members representing 10% call for an extraordinary meeting of No 0.0 members? Assuming that Buyer is a limited company, must all Yes 1.0 members consent to add a new member? Assuming that Buyer is a limited company, must a member first offer to sell his interest to the existing members before Yes 1.0 selling to a non-member? Extent of ownership and control index (0-10) 6.0 Is it forbidden to appoint the same individual as CEO and Yes 1.0 chair of the board of directors? Must the board of directors include independent and Yes 1.0 nonexecutive board members? Can shareholders remove members of the board of Yes 1.0 directors without cause before the end of their term? Must the board of directors include a separate audit Yes 1.0 committee exclusively comprising board members? Must a potential acquirer make a tender offer to all Yes 1.0 shareholders upon acquiring 50% of Buyer? Must Buyer pay dividends within a maximum period set by No 0.0 law after the declaration date? Is a subsidiary prohibited from acquiring shares issued by its No 0.0 parent company? Assuming that Buyer is a limited company, is there a Yes 1.0 management deadlock breaking mechanism? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to all shareholders upon No 0.0 acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer No 0.0 Doing Business 2017 Bosnia and Herzegovina 72 distribute profits within a maximum period set by law after the declaration date? Extent of corporate transparency index (0-10) 6.0 Must Buyer disclose direct and indirect beneficial ownership Yes 1.0 stakes representing 5%? Must Buyer disclose information about board members’ other directorships as well as basic information on their No 0.0 primary employment? Must Buyer disclose the compensation of individual No 0.0 managers? Must a detailed notice of general meeting be sent 21 days No 0.0 before the meeting? Can shareholders representing 5% of Buyer’s share capital Yes 1.0 put items on the agenda for the general meeting? Must Buyer's annual financial statements be audited by an Yes 1.0 external auditor? Must Buyer disclose its audit reports to the public? Yes 1.0 Assuming that Buyer is a limited company, must members Yes 1.0 meet at least once a year? Assuming that Buyer is a limited company, can members No 0.0 representing 5% put items on the meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual financial statements be audited by an external Yes 1.0 auditor? Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 73 PAYING TAXES Taxes are essential. The level of tax rates needs to be WHAT THE PAYING TAXES INDICATORS carefully chosen—and needless complexity in tax rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2014 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, sales tax or goods and service tax) Using a case scenario, Doing Business records the taxes and mandatory contributions that a medium- Method and frequency of filing and payment size company must pay in a given year as well as Time required to comply with 3 major taxes measures of the administrative burden of paying (hours per year) taxes and contributions and dealing with postfiling processes. This case scenario uses a set of financial Collecting information and computing the tax payable statements and assumptions about transactions made over the year. Information is also compiled on Completing tax return forms, filing with the frequency of filing and payments, time taken to proper agencies comply with tax laws, time taken to comply with the Arranging payment or withholding requirements of postfiling processes and time waiting for these processes to be completed. The Preparing separate tax accounting books, if required ranking of economies on the ease of paying taxes is determined by sorting their distance to frontier Total tax rate (% of profit before all taxes) scores on the ease of paying taxes. These scores are Profit or corporate income tax the simple average of the distance to frontier scores for each of the four component indicators – number Social contributions and labor taxes paid by of tax payments. time, total tax rate and postfiling the employer index – with a threshold and a nonlinear Property and property transfer taxes transformation applied to one of the component Dividend, capital gains and financial indicators, the total tax rate1. If both VAT (or GST) transactions taxes and corporate income tax apply, the postfiling index is the simple average of the distance to frontier Waste collection, vehicle, road and other taxes scores for each of the four components: the time to Postfiling Index comply with a VAT or GST refund, the time to obtain The time to comply with a VAT or GST refund a VAT or GST refund, the time to comply with a corporate income tax audit and the time to complete The time to receive a VAT or GST refund a corporate income tax audit. If only VAT (or GST) or The time to comply with a corporate income corporate income tax If onapplies, the postfiling tax audit index is the simple average of the scores for only the The time to complete a corporate income tax two components pertaining to the applicable tax. If audit neither VAT (or GST) nor corporate income tax 1 The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Doing Business 2017 Bosnia and Herzegovina 74 applies, the postfiling index is not included in the ranking of the ease of paying taxes. Assumptions about the corporate income tax audit process: Taxes and mandatory contributions include corporate income tax, turnover tax and all labor  An error in the calculation of the income tax taxes and contributions paid by the company. A liability (for example, use of incorrect tax range of standard deductions and exemptions are depreciation rates, or incorrectly treating an also recorded. expense as tax deductible) leads to an incorrect All financial statement variables are proportional to income tax return and consequently an 2012 income per capita. To make the data underpayment of corporate income tax. comparable across economies, several assumptions  TaxpayerCo. discovered the error and are used. voluntarily notified the tax authority of the error TaxpayerCo is a medium-size business that started in the corporate income tax return. operations on January 1, 2014. The business starts from the same financial position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded. Taxes and mandatory contributions are measured at all levels of government. Assumptions about the VAT refund process:  In June 2015, TaxpayerCo. makes a large capital purchase: one additional machine for manufacturing pots.  The value of the machine is 65 times income per capita of the economy.  Sales are equally spread per month (that is, 1,050 times income per capita divided by 12).  Cost of goods sold are equally expensed per month (that is, 875 times income per capita divided by 12).  The seller of the machinery is registered for VAT or general sales tax (GST).  Excess input VAT incurred in June will be fully recovered after four consecutive months if the VAT or GST rate is the same for inputs, sales and the machine and the tax reporting period is every month. Doing Business 2017 Bosnia and Herzegovina 75 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with tax table 8.3 the end of this chapter for details). Most obligations and postfiling processes in Bosnia and indicator sets refer to a case scenario in the largest Herzegovina—and how much do firms pay in taxes? business city of an economy, except for 11 economies for Globally, Bosnia and Herzegovina stands at 133 in the which the data are a population-weighted average of the ranking of 190 economies on the ease of paying taxes 2 largest business cities. See the chapter on distance to (figure 8.1). The rankings for comparator economies and frontier and ease of doing business ranking at the end of the regional average ranking provide other useful this profile for more details. information for assessing the tax compliance burden for . businesses in Bosnia and Herzegovina (see table 8.2 and Figure 8.1 How Bosnia and Herzegovina and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 76 PAYING TAXES Economies around the world have made paying taxes and exemptions. Many have lowered tax rates. Changes faster, easier and less costly for businesses —such as by have brought concrete results. Some economies consolidating payments and filings of taxes, offering simplifying tax payment and reducing rates have seen electronic systems for filing and payment, establishing tax revenue rise. What tax reforms has Doing Business taxpayer service centers or allowing for more deductions recorded in Bosnia and Herzegovina (table 8.1)? Table 8.1 How has Bosnia and Herzegovina made paying taxes easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Bosnia and Herzegovina simplified its labor tax processes, DB2011 reduced employer contribution rates for social security and abolished its payroll tax. Bosnia and Herzegovina eased the administrative burden of DB2013 filing and paying social security contributions by implementing electronic filing and payment systems. Bosnia and Herzegovina introduced a penalty for failure to employ the required minimum number of people with DB2014 disabilities—though it also temporarily abolished the forestry tax. Bosnia and Herzegovina made paying taxes easier by abolishing DB2017 the tourist community fee. Source: Doing Business database. 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. Doing Business 2017 Bosnia and Herzegovina 77 PAYING TAXES What are the details? The indicators reported here for Bosnia and LOCATION OF STANDARDIZED COMPANY Herzegovina are based on the taxes and contributions that would be paid by a standardized case study company used by Doing Business in City: Sarajevo collecting the data (see the section in this chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of assumptions and transactions The taxes and contributions paid are listed in table 8.2, that the company completed during its 2nd year of along with the associated number of payments, time operation. Respondents are asked how much taxes and tax rate. and mandatory contributions the business must pay, how these taxes are filed and paid, how much time The postfiling index is based on four components—the taxpayers spend preparing, filing and paying three time to comply with a VAT or GST refund, the time to major taxes (profit taxes, labor taxes including obtain a VAT or GST refund, the time to comply with a mandatory contributions and consumption taxes) and corporate income tax audit and the time to complete a how much time taxpayers spend complying with corporate income tax audit. These components are postfiling processes and waiting for these processes based on expanded case study assumptions. If only VAT to be completed. (or GST) or corporate income tax applies for an economy, the postfiling index is the simple average of the scores for only the two components pertaining to the applicable tax. If neither VAT (or GST) nor corporate income tax applies, the postfiling index is not included in the ranking of the ease of paying taxes. Table 8.2 Summary of tax rates and administration 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 12 68 10% 7.24 profits gross Social security contributions 1 online 81 10.5% 11.84 salaries Forestry tax 5 0.07% turnover 1.24 25% for every Contribution for professional disabled average rehabilitation and employment 0 jointly person that net salary 0.92 of disabled persons must have in FBiH been employed Doing Business 2017 Bosnia and Herzegovina 78 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 per square Local property tax 1 4 BAM 0.46 meter Contribution for protection net against natural and other 0 jointly 0.5% 0.39 salaries disasters net Water protection 0 jointly 0.5% 0.39 salaries Tourist community fee 1 0.05% / 0% revenue 0.07 Signage fee 1 200 BAM 0.02 included small Fuel tax 1 into fuel 0.00 amount price value not VAT 12 262 17% 0.00 added included Employee paid - Social security gross 0 jointly 31% 0.00 withheld contributions salaries Totals 34.0 411.0 22.6 Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 79 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE FOR IMPORT & EXPORT business. Excessive use of paper documents, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead Documentary compliance to extra costs and delays for exporters and Obtaining, preparing and submitting documents importers, stifling trade potential. during transport, clearance, inspections and port or border handling in origin economy What do the indicators cover? Obtaining, preparing and submitting documents Doing Business records the time and cost required by destination economy and any transit associated with the logistical process of exporting economies and importing goods. Doing Business measures the Covers all documents required by law and in time and cost (excluding tariffs) associated with practice, including electronic submissions of three sets of procedures—documentary information as well as non-shipment-specific compliance, border compliance and domestic documents necessary to complete the trade transport—within the overall process of exporting Border compliance or importing a shipment of goods. The ranking of economies on the ease of trading across borders is Customs clearance and inspections determined by sorting their distance to frontier Inspections by other agencies (if applied to more scores for trading across borders. These scores are than 10% of shipments) the simple average of the distance to frontier Port or border handling scores for the time and cost for documentary compliance and border compliance to export and Processing of documents during clearance, import (domestic transport is not used for inspections and port or border handling. calculating the ranking). Domestic transport Loading and unloading of shipment at warehouse, To make the data comparable across economies, a dry port or border few assumptions are made about the traded goods and the transactions: Transport by most widely used mode between warehouse and terminal or dry port Time Traffic delays and road police checks while Time is measured in hours, and 1 day is 24 hours shipment is en route (for example, 22 days are recorded as 22 × 24 = 528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, suppose Cost that documents are submitted to a customs Insurance cost and informal payments for which no receipt agency at 8:00 a.m., are processed overnight and is issued are excluded from the costs recorded. Costs are can be picked up at 8:00 a.m. the next day. In this reported in U.S. dollars. Contributors are asked to convert case the time for customs clearance would be local currency into U.S. dollars based on the exchange rate recorded as 24 hours because the actual procedure prevailing on the day they answer the questionnaire. took 24 hours. Doing Business 2017 Bosnia and Herzegovina 80 Assumptions of the case study  If government fees are determined by the value of the shipment, the value is assumed to be $50,000.  For each of the 190 economies covered by Doing Business, it is assumed that a shipment  The product is new, not secondhand or used travels from a warehouse in the largest merchandise. business city of the exporting economy to a  The exporting firm is responsible for hiring and paying warehouse in the largest business city of the for a freight forwarder or customs broker (or both) importing economy. For 11 economies the and pays for all costs related to international shipping, data are also collected, under the same case domestic transport, clearance and mandatory study assumptions, for the second largest inspections by customs and other government business city. agencies, port or border handling, documentary  The import and export case studies assume compliance fees and the like for exports. The different traded products. It is assumed that importing firm is responsible for the above costs for each economy imports a standardized imports. shipment of 15 metric tons of containerized  The mode of transport is the one most widely used for auto parts (HS 8708) from its natural import the chosen export or import product and the trading partner—the economy from which it imports partner, as is the seaport, airport or land border the largest value (price times quantity) of auto crossing. parts. It is assumed that each economy exports the product of its comparative advantage  All electronic submissions of information requested by (defined by the largest export value) to its any government agency in connection with the natural export partner—the economy that is shipment are considered to be documents obtained, the largest purchaser of this product. Special prepared and submitted during the export or import products, such as precious metal and gems, process. live animals and pharmaceuticals are excluded  A port or border is defined as a place (seaport, airport from the list of possible export products, or land border crossing) where merchandise can enter however, and the second largest product or leave an economy. category is considered as needed.  Government agencies considered relevant are  A shipment is a unit of trade. Export shipments agencies such as customs, port authorities, road do not necessarily need to be containerized, police, border guards, standardization agencies, while import shipments of auto parts are ministries or departments of agriculture or industry, assumed to be containerized. national security agencies and any other government authorities. Doing Business 2017 Bosnia and Herzegovina 81 TRADING ACROSS BORDERS Where does the economy stand today? The Trading across Borders indicator refers to a case Globally, Bosnia and Herzegovina stands at 36 in the study scenario of a warehouse in the largest business city ranking of 190 economies on the ease of trading across of an economy (except for 11 economies for which the borders (figure 9.1). data are a population-weighted average of the 2 largest While not included in the distance to frontier or ease of business cities) trading with the main import and export doing business ranking, data on domestic transportation partner through the economy’s main border crossing. is also recorded for all economies and provided in Table 9.3. Figure 9.1 How Bosnia and Herzegovina and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 82 TRADING ACROSS BORDERS What are the details? The indicators reported here for Bosnia and LOCATION OF STANDARDIZED COMPANY Herzegovina are based on a set of specific predefined procedures for trading a shipment of goods by the most widely used mode of transport (whether sea or City: Sarajevo land or some combination of these). The information on the time and cost to complete export and import The details on the predefined set of procedures, and the is collected from local freight forwarders, customs associated time and cost, for exporting and importing a brokers and traders. shipment of goods are listed in the summary bellow, along with the required documents. Table 9.2 Summary of export and import time and cost for trading across borders in Bosnia and Herzegovina Bosnia and Herzegovina Europe & Central Asia Time to export: Border compliance (hours) 5 28 Cost to export: Border compliance (USD) 106 195 Time to export: Documentary compliance (hours) 4 27 Cost to export: Documentary compliance (USD) 92 111 Time to import: Border compliance (hours) 6 26 Cost to import: Border compliance (USD) 109 202 Time to import: Documentary compliance (hours) 8 26 Cost to import: Documentary compliance (USD) 97 91 Source: Doing Business database. Table 9.3 Summary of trading details, transport time and documents for trading across borders in Bosnia and Herzegovina Export Import HS 94 : Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; lamps and HS 8708: Parts and accessories Product lighting fittings, not elsewhere of motor vehicles specified or included; illuminated signs, illuminated name-plates and the like; prefabricated buildings Trade partner Germany Germany Slavonski Brod border Border Slavonski Brod border crossing crossing Doing Business 2017 Bosnia and Herzegovina 83 Export Import Distance (km) 215 215 Domestic transport time (hours) 4 4 Domestic transport cost (USD) 296 296 Source: Doing Business database. Note: Although Doing Business collects and publishes data on the time and cost for domestic transport, it does not use these data in calculating the distance to frontier score for trading across borders or the ranking on the ease of trading across borders. Documents to export Commercial invoice Packing list EUR 1 - Certificate of Origin Export License Customs export declaration Documents to import Commercial invoice EUR 1 - Certificate of origin Customs import declaration Certificate of quality Packing list Proof of bank payment Source: Doing Business database. Note: Doing Business continues to collect data on the number of documents needed to trade internationally. Unlike in previous years, however, these data are excluded from the calculation of the distance to frontier score and ranking. The time and cost for documentary compliance serve as better measures of the overall cost and complexity of compliance with documentary requirements than does the number of documents required. Doing Business 2017 Bosnia and Herzegovina 84 Figure 9.2 Summary of Bosnia and Herzegovina on the ease of trading across borders Export Import Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 85 ENFORCING CONTRACTS WHAT THE ENFORCING CONTRACTS Effective commercial dispute resolution has many benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Time required to enforce a contract through courts encourage new business relationships because the courts (calendar days) businesses know they can rely on the courts if a new customer fails to pay. Speedy trials are essential for Time to file and serve the case small enterprises, which may lack the resources to Time for trial and to obtain the judgment stay in business while awaiting the outcome of a long Time to enforce the judgment court dispute. Cost required to enforce a contract through What do the indicators cover? the courts (% of claim) Doing Business measures the time and cost for Attorney fees resolving a standardized commercial dispute through a local first-instance court. In addition, Doing Court fees Business measures the quality of judicial processes Enforcement fees index, evaluating whether each economy has Quality of judicial processes index (0-18) adopted a series of good practices that promote quality and efficiency in the court system. The Court structure and proceedings (0-5) ranking of economies on the ease of enforcing Case management (0-6) contracts is determined by sorting their distance to frontier scores. These scores are the simple average Court automation (0-4) of the distance to frontier scores for each of the Alternative dispute resolution (0-3) component indicators. The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The  The seller sues the buyer before the court with case study assumes that the court hears an expert on jurisdiction over commercial cases worth 200% of the quality of the goods in dispute. This distinguishes income per capita or $5,000. the case from simple debt enforcement. To make the  The seller requests a pretrial attachment to secure data comparable across economies, Doing Business the claim. uses several assumptions about the case:  The dispute on the quality of the goods requires an expert opinion.  The dispute concerns a lawful transaction  The judge decides in favor of the seller; there is no between two businesses (Seller and Buyer), both appeal. located in the economy’s largest business city. For 11 economies the data are also collected for  The seller enforces the judgment through a public the second largest business city. sale of the buyer’s movable assets.  The buyer orders custom-made goods, then fails to pay.  The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater. Doing Business 2017 Bosnia and Herzegovina 86 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial on distance to frontier and ease of doing business dispute through the courts in Bosnia and Herzegovina? ranking at the end of this profile for more details. According to data collected by Doing Business, contract Globally, Bosnia and Herzegovina stands at 64 in the enforcement takes 595.0 days and costs 36.0% of the ranking of 190 economies on the ease of enforcing value of the claim. Most indicator sets refer to the contracts (figure 10.1). The rankings for comparator largest business city of an economy, except for 11 economies and the regional average provide other useful economies for which the data are a population-weighted benchmarks for assessing the efficiency of contract average of the 2 largest business cities. See the chapter enforcement in Bosnia and Herzegovina. Figure 10.1 How Bosnia and Herzegovina and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 87 ENFORCING CONTRACTS What are the details? The data on time and cost reported here for Bosnia ECONOMY DETAILS and Herzegovina are built by following the step-by- step evolution of a commercial sale dispute within the court, under the assumptions about the case Claim value: BAM 14,309 described above (figure 10.2). The time and cost of resolving the standardized dispute are identified Sarajevo Municipal Court, through study of the codes of civil procedure and Court name: Commercial Division other court regulations, as well as through questionnaires completed by local litigation lawyers City: Sarajevo (and, in a quarter of the economies covered by Doing Business, by judges as well). Figure 10.2 Time and cost of contract enforcement in Bosnia and Herzegovina and comparator economies Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 88 Table 10.2 Details on time and cost for enforcing contracts in Bosnia and Herzegovina Bosnia and Europe & Central Indicator Herzegovina Asia average Time (days) 595 486 Filing and service 30 Trial and judgment 385 Enforcement of judgment 180 Cost (% of claim) 36.0 26.6 Attorney fees 25.0 Court fees 8.0 Enforcement fees 3.0 Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 89 ENFORCING CONTRACTS Quality of judicial processes index The quality of judicial processes index measures The scores reported here show which of these good whether each economy has adopted a series of good practices are available in Bosnia and Herzegovina (figure practices in its court system in four areas: court 10.3). structure and proceedings, case management, court This methodology was initially developed by Djankov and automation and alternative dispute resolution. The others (2003) and is adopted here with several changes. score on the quality of judicial processes index is the The quality of judicial processes index was introduced in sum of the scores on these 4 sub-components. The Doing Business 2016. The good practices tested in this index ranges from 0 to 18, with higher values index were developed on the basis of internationally indicating more efficient judicial processes. recognized good practices promoting judicial efficiency. Figure 10.3 Quality of judicial processes index in Bosnia and Herzegovina and comparator economies Doing Business 2017 Bosnia and Herzegovina 90 Source: Doing Business database. Table 10.3 Details of the quality of judicial processes index in Bosnia and Herzegovina Answer Score Quality of judicial processes index (0-18) 11.0 Court structure and proceedings (0-5) 5.0 1. Is there a court or division of a court dedicated solely to hearing Yes 1.5 commercial cases? 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small Yes claims? 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in Yes 0.0 court as a man's? Case management (0-6) 3.5 1. Time standards 0.5 1.a. Are there laws setting overall time standards for key court events in Yes a civil case? 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? No 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that No can be granted? 2.b. Are adjournments limited to unforeseen and exceptional Yes circumstances? 2.c. If rules on adjournments exist, are they respected in more than 50% No of cases? 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) clearance rate report; Yes 1.0 (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques No 0.0 used before the competent court? 5. Are there any electronic case management tools in place within the Yes 1.0 competent court for use by judges? Doing Business 2017 Bosnia and Herzegovina 91 Answer Score 6. Are there any electronic case management tools in place within the Yes 1.0 competent court for use by lawyers? Court automation (0-4) 0.0 1. Can the initial complaint be filed electronically through a dedicated No 0.0 platform within the competent court? 2. Is it possible to carry out service of process electronically for claims No 0.0 filed before the competent court? 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 0.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public through publication in official gazettes, No in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made available to the general public through No publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 1. Arbitration 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or section of the applicable code of civil Yes procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy—that cannot be submitted to No arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the Yes courts? 2. Mediation/Conciliation 1.0 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or section of the applicable code of civil Yes procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or conciliation is successful, a refund of No court filing fees, income tax credits or the like)? Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 92 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 businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By clarifying the expectations of creditors and debtors about the outcome of insolvency Appeals and requests for extension are proceedings, well-functioning insolvency systems can included facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and sustainably grow the economy. estate) What do the indicators cover? Measured as percentage of estate value Doing Business studies the time, cost and outcome of Court fees insolvency proceedings involving domestic legal Fees of insolvency administrators entities. These variables are used to calculate the Lawyers’ fees recovery rate, which is recorded as cents on the Assessors’ and auctioneers’ fees dollar recovered by secured creditors through Other related fees reorganization, liquidation or debt enforcement Outcome (foreclosure or receivership) proceedings. To determine the present value of the amount Whether business continues operating as a recovered by creditors, Doing Business uses the going concern or business assets are sold lending rates from the International Monetary Fund, piecemeal supplemented with data from central banks and the Recovery rate for creditors Economist Intelligence Unit. Measures the cents on the dollar recovered To make the data on the time, cost and outcome by secured creditors comparable across economies, several assumptions Outcome for the business (survival or not) about the business and the case are used: determines the maximum value that can be  A hotel located in the largest city (or cities) has recovered 201 employees and 50 suppliers. The hotel Official costs of the insolvency proceedings experiences financial difficulties. are deducted  The value of the hotel is 100% of the income per Depreciation of furniture is taken into capita or the equivalent in local currency of USD account 200,000, whichever is greater. Present value of debt recovered  The hotel has a loan from a domestic bank, Strength of insolvency framework index (0- secured by a mortgage over the hotel’s real 16) estate. The hotel cannot pay back the loan, but makes enough money to operate otherwise. Sum of the scores of four component indices: Commencement of proceedings index (0-3) In addition, Doing Business evaluates the adequacy and integrity of the existing legal framework Management of debtor’s assets index (0-6) applicable to liquidation and reorganization Reorganization proceedings index (0-3) proceedings through the strength of insolvency Creditor participation index (0-4) framework index. The index tests whether economies adopted internationally accepted good practices in management of debtor’s assets, reorganization four areas: commencement of proceedings, proceedings and creditor participation. Doing Business 2017 Bosnia and Herzegovina 93 RESOLVING INSOLVENCY Where does the economy stand today? Globally, Bosnia and Herzegovina stands at 41 in the indicator does not measure insolvency proceedings of ranking of 190 economies on the ease of resolving individuals and financial institutions. The data are derived insolvency (figure 11.1). The ranking of economies on the from questionnaire responses by local insolvency ease of resolving insolvency is determined by sorting practitioners and verified through a study of laws and their distance to frontier scores for resolving insolvency. regulations as well as public information on bankruptcy These scores are the simple average of the distance to systems. frontier scores for the recovery rate and the strength of insolvency framework index. The resolving insolvency Figure 11.1 How Bosnia and Herzegovina and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 94 RESOLVING INSOLVENCY Recovery of debt in insolvency Data on the time, cost and outcome refer to the most average recovery rate is 37.3 cents on the dollar. Most likely in-court insolvency procedure applicable under indicator sets refer to a case scenario in the largest specific case study assumptions. business city of an economy, except for 11 economies for which the data are a population-weighted average of the According to data collected by Doing Business, resolving 2 largest business cities. insolvency takes 3.3 years on average and costs 9.0% of the debtor’s estate, with the most likely outcome being that the company will be sold as piecemeal sale. The Figure 11.2 Efficiency of proceedings - time, cost and recovery rate in Bosnia and Herzegovina and comparator economies. Source: Doing Business database. Note: The recovery rate is calculated based on the time, cost and outcome of insolvency proceedings involving domestic legal entities and is recorded as cents on the dollar recovered by secured creditors. The calculation takes into account the outcome: whether the business emerges from the proceedings as a going concern or the assets are sold piecemeal. Then the costs of the proceedings are deducted. Finally, the value lost as a result of the time the money remains tied up in insolvency proceedings is taken into account. The recovery rate is the present value of the remaining proceeds, based on end-2015 lending rates. Doing Business 2017 Bosnia and Herzegovina 95 Table 11.1 Details of data on efficiency of insolvency proceedings in Bosnia and Herzegovina Indicator Answer Explanation It is very likely that, based on information provided in case study assumptions, BizBank will initiate foreclosure, as Mirage can neither obtain a new loan from any other financial institution nor renegotiate its current loan with BizBank. Additionally, Mirage expects to have negative net worth and operating losses Proceeding foreclosure in both following years. Having these facts in mind, it is unlikely that any reorganization plan could be approved by the court. Therefore, the proceedings will be continued as foreclosure which will result with the sale of the hotel. If BizBank initiates foreclosure, the hotel will be sold in order to settle the Outcome piecemeal sale Mirages obligation toward BizBank. It takes 3.3 years to finish foreclosure proceedings in Bosnia and Herzegovina. Most delays in the proceeding are due to the sale of the immovable property. Steps for sale of movable property are simpler. Generally, movable property could be sold by bankruptcy administrator either directly in negotiations with the third party or at a public auction. The main steps in the foreclosure proceedings (for sale of immovable property) are: 1. assessment of the immovable property value; 2. sale of the immovable property. The sale of the property is conducted by the court. 3. payment of the price and transfer of the immovable property to the buyer. There are 3 main reasons for delay during the sale of immovable property: • Time (in 3.3 the slowness of the courts that lead the sale procedure; • the complexity of the years) court procedure for sale of the immovable property, which slows the sale procedure. For example, the immovable property cannot be sold below 1/2 of the assessed value at the first court hearing for the sale, respectively below 1/3 of the assessed value at the second court hearing for the sale of the property. Only at the third court hearing for the sale, the immovable property might be sold without any limitations regarding the assessed value. • potential objections of the secured creditor’s claim by a third party. In this case third party initiates separate litigation proceeding where he/she proves that the creditor does not have secured claim. This litigation might take a year or more. Cost (% of 9.0 Most of the expenses will be used to pay attorneys' fees. estate) Recovery rate: 37.3 Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 96 LABOR MARKET REGULATION Doing Business studies the flexibility of regulation of food retail sector and they apply even to firms employment, specifically as it relates to the areas of that are not party to them. hiring, working hours and redundancy. Doing Business  Abides by every law and regulation but does not also measures several aspects of job quality such as the grant workers more benefits than those availability of maternity leave, paid sick leave and the mandated by law, regulation or (if applicable) equal treatment of men and women at the workplace. collective bargaining agreements. Doing Business 2017 presents the data for the labor market regulation indicators in an annex. The report does not present rankings of economies on these indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business. Detailed data collected on labor market regulation are available on the Doing Business website (http://www.doingbusiness.org). The data on labor market regulation are based on a detailed questionnaire on employment regulations that is completed by local lawyers and public officials. Employment laws and regulations as well as secondary sources are reviewed to ensure accuracy. To make the data comparable across economies, several assumptions about the worker and the business are used. The worker:  Is a cashier in a supermarket or grocery store, age 19, with one year of work experience.  Is a full-time employee.  Is not a member of the labor union, unless membership is mandatory. The business:  Is a limited liability company (or the equivalent in the economy).  Operates a supermarket or grocery store in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.  Has 60 employees.  Is subject to collective bargaining agreements if such agreements cover more than 50% of the Doing Business 2017 Bosnia and Herzegovina 97 LABOR MARKET REGULATION What are the details? The data reported here for Bosnia and Herzegovina are Employment laws and regulations as well as secondary based on a detailed survey of labor market regulation sources are reviewed to ensure accuracy. that is completed by local lawyers and public officials. Hiring Data on hiring cover five areas: (i) whether fixed-term minimum wage to the average value added per worker contracts are prohibited for permanent tasks; (ii) the (the ratio of an economy’s GNI per capita to the maximum cumulative duration of fixed-term contracts; working-age population as a percentage of the total (iii) the minimum wage for a cashier, age 19, with one population). year of work experience; and (iv) the ratio of the Hiring Data Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) 24 months (Art. 19, Labor Law of FBiH) Maximum length of fixed-term contracts, including renewals (months) 24.0 Minimum wage applicable to the worker assumed in the case study 353.6 (US$/month) Ratio of minimum wage to value added per worker 0.6 Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 98 LABOR MARKET REGULATION Working hours Data on working hours cover nine areas: i) the maximum and nonnursing women can work the same night hours number of working days allowed per week; (ii) the as men*; (vii) whether there are restrictions on weekly premium for night work (as a percentage of hourly pay); holiday work; (viii) whether there are restrictions on (iii) the premium for work on a weekly rest day (as a overtime work; and (ix) the average paid annual leave for percentage of hourly pay); (iv) the premium for overtime workers with 1 year of tenure, 5 years of tenure, and 10 work (as a percentage of hourly pay); (v) whether there years of tenure. are restrictions on night work; (vi) whether nonpregnant Working Hours Data Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 30.0 Premium for work on weekly rest day (% of hourly pay) 20.0 Premium for overtime work (% of hourly pay) 30.0 Restrictions on night work? No Whether nonpregnant and nonnursing women can work the same night Yes hours as men Restrictions on weekly holiday? No Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 18.0 Paid annual leave for a worker with 5 years of tenure (working days) 18.0 Paid annual leave for a worker with 10 years of tenure (working days) 18.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 18.0 working days) Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 99 LABOR MARKET REGULATION Redundancy rules Data on redundancy cover nine areas: (i) the length of whether the employer needs approval from a third party the maximum probationary period (in months) for to terminate one redundant worker; (vi) whether the permanent employees; (ii) whether redundancy is employer needs approval from a third party to terminate allowed as a basis for terminating workers; (iii) whether a group of nine redundant workers; (vii) whether the law the employer needs to notify a third party (such as a requires the employer to reassign or retrain a worker government agency) to terminate one redundant worker; before making the worker redundant; (viii) whether (iv) whether the employer needs to notify a third party to priority rules apply for redundancies; and (ix) whether terminate a group of nine redundant workers; (v) priority rules apply for reemployment. Redundancy rules Data Maximum length of probationary period (months) 6.0 Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? Yes Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? Yes Priority rules for redundancies? No Priority rules for reemployment? Yes Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 100 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice severance payments applicable to a worker with 1 year of requirements and severance payments due when tenure, a worker with 5 years and a worker with 10 years terminating a redundant worker, expressed in weeks of is considered. One month is recorded as 4 and 1/3 salary. The average value of notice requirements and weeks. Redundancy cost indicator (in salary weeks) Data Notice period for redundancy dismissal for a worker with 1 year of tenure 2.0 Notice period for redundancy dismissal for a worker with 5 years of tenure 2.0 Notice period for redundancy dismissal for a worker with 10 years of tenure 2.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 2.0 of tenure) Severance pay for redundancy dismissal for a worker with 1 year of tenure 0.0 Severance pay for redundancy dismissal for a worker with 5 years of tenure 7.2 Severance pay for redundancy dismissal for a worker with 10 years of tenure 14.4 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 7.2 of tenure) Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 101 LABOR MARKET REGULATION Job quality Doing Business introduced new data on job quality in leave receive 100% of wages; (vi) the availability of five 2015. Doing Business 2017 covers eight questions on job fully paid days of sick leave a year; (vii) whether a worker quality (i) whether the law mandates equal remuneration is eligible for an unemployment protection scheme after for work of equal value; (ii) whether the law mandates one year of service; and (viii) the minimum duration of nondiscrimination based on gender in hiring; (iii) the contribution period (in months) required for whether the law mandates paid or unpaid maternity unemployment protection. leave; (iv) the minimum length of paid maternity leave (in . calendar days); (v) whether employees on maternity Job Quality Data Equal remuneration for work of equal value? Yes Gender nondiscrimination in hiring? Yes Paid or unpaid maternity leave mandated by law? Yes Minimum length of maternity leave (calendar days)? 365.0 Receive 100% of wages on maternity leave? No Five fully paid days of sick leave a year? Yes Unemployment protection after one year of employment? Yes Minimum contribution period for unemployment protection (months)? 8.0 Source: Doing Business database. Doing Business 2017 Bosnia and Herzegovina 102 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING Doing Business presents results for two aggregate even though it is no longer at the frontier in a measures: the distance to frontier score and the ease of subsequent year. doing business ranking, which is based on the distance For scores such as those on the strength of legal rights to frontier score. The ease of doing business ranking index or the quality of land administration index, the compares economies with one another; the distance to frontier is set at the highest possible value. For the total frontier score benchmarks economies with respect to tax rate, consistent with the use of a threshold in regulatory best practice, showing the absolute distance calculating the rankings on this indicator, the frontier is to the best performance on each Doing Business defined as the total tax rate at the 15th percentile of the indicator. When compared across years, the distance to overall distribution for all years included in the analysis frontier score shows how much the regulatory up to and including Doing Business 2015. For the time to environment for local entrepreneurs in an economy has pay taxes the frontier is defined as the lowest time changed over time in absolute terms, while the ease of recorded among all economies that levy the three major doing business ranking can show only how much the taxes: profit tax, labor taxes and mandatory regulatory environment has changed relative to that in contributions, and value added tax (VAT) or sales tax. For other economies. the different times to trade across borders, the frontier is Distance to Frontier defined as 1 hour even though in many economies the time is less than that. The distance to frontier score captures the gap between an economy’s performance and a measure of best In the same formulation, to mitigate the effects of practice across the entire sample of 41 indicators for 10 extreme outliers in the distributions of the rescaled data Doing Business topics (the labor market regulation for most component indicators (very few economies indicators are excluded). For starting a business, for need 700 days to complete the procedures to start a example, New Zealand has the smallest number of business, but many need 9 days), the worst performance procedures required (1), and New Zealand the shortest is calculated after the removal of outliers. The definition time to fulfill them (0.5 days). Slovenia has the lowest of outliers is based on the distribution for each cost (0.0), and Australia, Colombia and 111 other component indicator. To simplify the process two rules economies have no paid-in minimum capital were defined: the 95th percentile is used for the requirement (table 14.1 in the Doing Business 2017 indicators with the most dispersed distributions report). (including minimum capital, number of payments to pay taxes, and the time and cost indicators), and the 99th Calculation of the distance to frontier score percentile is used for number of procedures. No outlier is Calculating the distance to frontier score for each removed for component indicators bound by definition economy involves two main steps. In the first step or construction, including legal index scores (such as the individual component indicators are normalized to a depth of credit information index, extent of conflict of common unit where each of the 41 component interest regulation index and strength of insolvency indicators y (except for the total tax rate) is rescaled framework index) and the recovery rate (figure 14.1 in using the linear transformation (worst − y)/(worst − the Doing Business 2017 report). frontier). In this formulation the frontier represents the In the second step for calculating the distance to frontier best performance on the indicator across all economies score, the scores obtained for individual indicators for since 2005 or the third year in which data for the each economy are aggregated through simple averaging indicator were collected. Both the best performance and into one distance to frontier score, first for each topic the worst performance are established every five years and then across all 10 topics: starting a business, dealing based on the Doing Business data for the year in which with construction permits, getting electricity, registering they are established, and remain at that level for the five property, getting credit, protecting minority investors, years regardless of any changes in data in interim years. paying taxes, trading across borders, enforcing contracts Thus an economy may set the frontier for an indicator and resolving insolvency. More complex aggregation methods—such as principal components and unobserved components—yield a ranking nearly Doing Business 2017 Bosnia and Herzegovina 103 identical to the simple average used by Doing Business2. The nonlinear transformation is not based on any Thus Doing Business uses the simplest method: economic theory of an “optimal tax rate” that minimizes weighting all topics equally and, within each topic, giving distortions or maximizes efficiency in an economy’s equal weight to each of the topic components 3. overall tax system. Instead, it is mainly empirical in nature. The nonlinear transformation along with the An economy’s distance to frontier score is indicated on a threshold reduces the bias in the indicator toward scale from 0 to 100, where 0 represents the worst economies that do not need to levy significant taxes on performance and 100 the frontier. All distance to frontier companies like the Doing Business standardized case calculations are based on a maximum of five decimals. study company because they raise public revenue in However, indicator ranking calculations and the ease of other ways—for example, through taxes on foreign doing business ranking calculations are based on two companies, through taxes on sectors other than decimals. manufacturing or from natural resources (all of which are The difference between an economy’s distance to outside the scope of the methodology). In addition, it frontier score in any previous year and its score in 2017 acknowledges the need of economies to collect taxes illustrates the extent to which the economy has closed from firms. the gap to the regulatory frontier over time. And in any Calculation of scores for economies with 2 cities given year the score measures how far an economy is covered from the best performance at that time. For each of the 11 economies in which Doing Business Treatment of the total tax rate collects data for the second largest business city as well The total tax rate component of the paying taxes as the largest one, the distance to frontier score is indicator set enters the distance to frontier calculation in calculated as the population-weighted average of the a different way than any other indicator. The distance to distance to frontier scores for these two cities (table frontier score obtained for the total tax rate is 13.1). This is done for the aggregate score, the scores for transformed in a nonlinear fashion before it enters the each topic and the scores for all the component distance to frontier score for paying taxes. As a result of indicators for each topic. the nonlinear transformation, an increase in the total tax rate has a smaller impact on the distance to frontier score for the total tax rate—and therefore on the distance to frontier score for paying taxes—for economies with a below-average total tax rate than it would have had before this approach was adopted in Doing Business 2015 (line B is smaller than line A in figure 14.2 of the Doing Business 2017 report). And for economies with an extreme total tax rate (a rate that is very high relative to the average), an increase has a greater impact on both these distance to frontier scores than it would have had before (line D is bigger than line C in figure 14.2 of the Doing Business 2017 report). 2 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the 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 importance in the context of a specific economy. 3 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. Indicators for all other topics are assigned equal weights Doing Business 2017 Bosnia and Herzegovina 104 Table 13.1 Weights used in calculating the distance to the most. First, it selects the economies that in 2015/16 frontier scores for economies with 2 cities covered implemented regulatory reforms making it easier to do business in 3 or more of the 10 topics included in this Economy City Weight (%) year’s aggregate distance to frontier score. Twenty-nine Dhaka 78 Bangladesh economies meet this criterion: Algeria; Azerbaijan; Chittagong 22 São Paulo 61 Bahrain; Belarus; Brazil; Brunei Darussalam; Burkina Faso; Brazil Rio de Janeiro 39 Côte d’Ivoire; Georgia; India; Indonesia; Kazakhstan; Shanghai 55 Kenya; Madagascar; Mali; Mauritania; Morocco; Niger; China Beijing 45 Pakistan; Poland; Senegal; Serbia; Singapore; Thailand; Mumbai 47 Togo; Uganda; the United Arab Emirates; Uzbekistan and India Delhi 53 Vanuatu. Second, Doing Business sorts these economies Jakarta 78 Indonesia on the increase in their distance to frontier score from Surabaya 22 Tokyo 65 the previous year using comparable data. Japan Osaka 35 Mexico City 83 Selecting the economies that implemented regulatory Mexico Monterrey 17 reforms in at least three topics and had the biggest Lagos 77 improvements in their distance to frontier scores is Nigeria Kano 23 intended to highlight economies with ongoing, broad- Karachi 65 based reform programs. The improvement in the Pakistan Lahore 35 distance to frontier score is used to identify the top Moscow 70 Russian Federation improvers because this allows a focus on the absolute St. Petersburg 30 improvement—in contrast with the relative improvement New York 60 United States Los Angeles 40 shown by a change in rankings—that economies have made in their regulatory environment for business. Source: United Nations, Department of Economic and Social Affairs, Population Division, World Urbanization Prospects, 2014 Revision. http://esa.un.org/unpd/wup/CD- ROM/Default.aspx. Ease of Doing Business ranking The ease of doing business ranking ranges from 1 to 190. Economies that improved the most across 3 or more The ranking of economies is determined by sorting the Doing Business topics in 2015/16 aggregate distance to frontier scores, rounded to 2 Doing Business 2017 uses a simple method to calculate decimals. which economies improved the ease of doing business Doing Business 2017 Bosnia and Herzegovina 105 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 190 Contributors http://www.doingbusiness.org/rankings More than 12,500 specialists in 190 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 190 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 136 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, case studies and repreneurship customized economy and regional profiles http://www.doingbusiness.org/reports Distance to frontier Data benchmarking 190 economies to the frontier in Methodology regulatory practice and a distance to frontier The methodologies and research papers underlying calculator Doing Business http://www.doingbusiness.org/data/distance-to- http://www.doingbusiness.org/methodology frontier Research Information on good practices Abstracts of papers on Doing Business topics and Showing where the many good practices identified related policy issues by Doing Business have been adopted http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice Doing Business reforms Short summaries of DB2017 business regulation reforms and lists of reforms since DB2008 http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2017 Bosnia and Herzegovina 106