COMPARING REGULATION IN 10 CITIES AND 181 ECONOMIES 51234 COMPARING REGULATION IN 10 CITIES AND 181 ECONOMIES A publication of the World Bank and the International Finance Corporation ©2009 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, D.C. 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved 1 2 3 4 5 09 08 07 06 A copublication of the World Bank and the International Finance Corporation This volume is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. 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Copies of Doing Business 2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth, and Doing Business in 2004: Understanding Regulation may be obtained at www.doingbusiness.org. Doing Business in Russia 2009 and other subnational and regional Doing Business studies can be downloaded at no charge at http://subnational.doingbusiness.org. Contents Doing Business in Russia 2009 is the first pare themselves to one another and to Map iv sub-national report for Russia in the 266 cities and municipalities worldwide Overview 1 Doing Business series, initially launched within 181 countries currently covered Starting a business 2 in 2003. In the global Doing Business by Doing Business reports. report, Russia is represented by Moscow, This report covers 4 topics: starting Dealing with construction permits 8 the most populous city. Doing Business a business, dealing with construction Registering property 14 in Russia 2009 measures business regu- permits, registering property and trad- Trading across borders 17 lations and their enforcement across 10 ing across borders. Russian cities. Comparisons with the Data of Doing Business in Russia Data notes 20 rest of the world are based on the indi- 2009 are current as of January 2009. Doing business indicators 25 cators in Doing Business 2009, the 6th in The data for the report was collected in a series of annual reports published by 2007 and updated in 2008. Comparisons List of procedures 31 the World Bank and the International with Moscow and other countries are Acknowledgements 40 Finance Corporation. The indicators based on the indicators in Doing Busi- in Doing Business in Russia 2009 are ness 2009. also comparable with the data in other The Doing Business methodology subnational Doing Business reports. All has limitations. In order to make the Doing Business data and reports are data comparable across countries and available at www.doingbusiness.org. regions, the indicators refer to a specific The first subnational Doing Busi- type of company--generally a limited li- ness study was launched in Mexico in ability company--and to standard cases. 2005, comparing efficiency of business This study was requested by the regulations by Mexican states. It helped Ministry of Regional Development of spark regional and municipal reforms the Russian Federation to the World by stimulating competition among Mex- Bank Group, represented by ICAS, the ican states. Investment Climate Advisory Service The Doing Business series investi- (www.wbginvestmentclimate.org), and gates the regulations that enhance busi- supported by the participating regional ness activity and those that constrain it. administrations. The letter inviting ex- In this project, quantitative indicators of pression of interest in the project was business regulations and their enforce- sent to 19 economically significant Rus- ment have been constructed and applied sia's regions of which 9, first to respond, to 10 regions of the Russian Federation: were included into the study. The city 8 regions are represented by their largest of Moscow was added as the country's cities. St. Petersburg and Moscow are so largest city which has been part of Doing large that they constitute separate regions Business global reports since 2004. The ("subjects of the Russian Federation"). 10 cities in this study and the regions The 10 cities compared in this study are: where they are located are highlighted Irkutsk, Kazan (the Republic of Tatar- on the map. stan), Moscow, Perm, Petrozavodsk (the The report was prepared with as- Republic of Karelia), Rostov-on-Don, St. sistance of the Foundation "Center for Petersburg, Tomsk, Tver and Voronezh Strategic Research "North-West" (www. (table 1.1). These 10 cities can now com- csr-nw.ru), located in St. Petersburg. urce: Doing Business database. Petrozavodsk St. Petersburg Tver MOSCOW Voronezh Perm Kazan Rostov Tomsk Irkutsk Population thousands percent of total Russian Federation 142,200 100.00 10 surveyed cities 20,753 14.59 Moscow 10,443 7.34 St. Petersburg 4,571 3.21 Kazan 1,116 0.78 Rostov-on-Don 1,052 0.74 Perm 990 0.70 Voronezh 841 0.59 Irkutsk 576 0.40 Tomsk 493 0.35 Tver 406 0.29 Petrozavodsk 266 0.19 Note: Population as of 1 January 2007 (estimated). Source: Russia Federal State Statistical Service, www.gks.ru. 1 Overview Table 1.1 Doing Business in Russia: where is it easiest? 1 Kazan (easiest) 2 Tver 3 Petrozavodsk 4 Rostov-on-Don 5 Tomsk 6 Irkutsk 7 Perm 8 St. Petersburg 9 Voronezh 10 Moscow (most difficult) Source : Doing Business database. For the 5th year in a row Eastern Europe region once again dominated the list of an effort was made to select indicators and Central Asia led the world in Doing top Doing Business reformers in 2007/08. where certain regional variations were Business reforms. As measured by the New this year: reforms in the region are observed. Because federal procedures Doing Business 2009 report, 26 of the re- moving eastward as 4 newcomers join the cover both business and property regis- gion's 28 economies implemented a total top 10 list of reformers: Azerbaijan, Alba- tration, regional variations might not be of 69 reforms. Since 2004 Doing Business nia, the Kyrgyz Republic and Belarus. expected--yet they were observed, and has been tracking reforms aimed at sim- Russia, represented by Moscow, this too is noteworthy. plifying business regulations, strength- ranked 120th out of 181 countries in The performances of the 10 Rus- ening property rights, opening up ac- 2009. The cumulative score was based on sian cities evaluated in this report on the cess to credit and enforcing contracts by Moscow's performance on all 10 indica- ease of business regulations and their measuring their impact on 10 indicator tors. Russia's best performance was on enforcement vary widely. While all local sets. Nearly 1,000 reforms with an impact enforcing contracts: it ranked 18th out governments share the same legal and on these indicators have been captured. of 181 countries. Russia's poorest perfor- institutional framework, they also inter- Eastern Europe and Central Asia has ac- mance was on dealing with construction pret and implement national regulations counted for a third of them. The region permits (in order to build a warehouse): differently. Much reform, both at the na- surpassed East Asia and Pacific in the av- it placed 180th out of 181 countries. tional and local level, is needed to reduce erage ease of doing business in 2007--and Doing Business in Russia 2009 is the high number of procedures, length maintained its place this year. Four of its the first attempt to evaluate business and cost to start a business, deal with economies--Georgia, Estonia, Lithuania regulations in 10 Russian cities, as mea- construction-related activities, transfer a and Latvia--are among the top 30 in the sured by the following 4 Doing Business property title and simplify requirements overall Doing Business ranking. indicators: to trade across Russia. Kazan is the easiest Rankings on the ease of doing busi- 1. Starting a business city to comply with regulatory formali- ness do not tell the whole story about 2. Dealing with construction permits ties among the 10 Russian cities, while an economy's business environment. The 3. Registering property Moscow is the most difficult one. Kazan indicators do not account for all factors outperforms the other 9 cities measured 4. Trading across borders important for doing business--for ex- in this study on the ease of doing business ample, macroeconomic conditions, infra- These 4 indicators were selected from the due to its relatively efficient procedures structure, workforce skills or security. But global 10 for two main reasons. First, 2 for starting a business and registering improvement in an economy's ranking indicators were notable because of Rus- property, and faster than the regional does indicate that its government is creat- sia's poor performance in them. They average on dealing with construction per- ing a regulatory environment more con- were: dealing with construction permits mits and trading across borders. ducive to operating a business. In Eastern (as discussed above) and trading across All methodological details and defi- Europe and Central Asia many economies borders (in which Russia also scored nitions can be found in the Data Notes. continue to do so--and economies in the near the bottom, at 161st place). Second, Starting a Table 2.1 Where is it easy to start a business--and where not? business Minimum Cost paid-in capital Procedures Time Cost Cost (% of income (% of income City (number) (days) (rubles) (US$) per capita) per capita) Rank Rostov-on-Don 13 22 3,545 118 1.6 2.2 1 Kazan 10 34 3,000 100 1.3 2.2 2 Irkutsk 13 23 4,220 140 1.9 2.2 3 Tver 10 27 4,870 162 2.1 2.2 3 Voronezh 14 24 4,150 138 1.8 2.2 5 Petrozavodsk 10 37 4,700 156 2.1 2.2 6 Tomsk 13 24 4,995 166 2.2 2.2 7 Moscow 9 30 6,200 206 2.7 2.2 8 St. Petersburg 11 29 4,900 163 2.2 2.2 9 Perm 10 36 5,110 170 2.2 2.2 10 Source: Doing Business database. Doing Business records the time, cost, economies experience economic shocks. land required only 1 procedure and 1 day, procedures and paid-in minimum capi- A recent study of 28 sectors in 55 coun- while Canada required 1 procedure and 5 tal required for an entrepreneur to start tries compared sectoral employment re- days and Australia required 2 procedures up and formally operate an industrial or allocation in the 1980s and 1990s. The and 2 days to start a company. commercial business. The process in- conclusion: reallocation was smoother in Regulated by federal law, business cludes obtaining all necessary licenses countries where it took fewer days to start registration requirements are supposed and permits as well as completing re- a business.2 This finding was confirmed to be uniform throughout Russia. How- quired notifications, verifications or in- by a number of other studies on the effect ever, the performance in terms of time, scriptions with the relevant authorities of entry regulation in economies open- number of procedures and cost of the (figure 2.1). After a study of the laws, ing their product markets to trade.3 The 10 Russian cities evaluated in this report regulations and publicly available infor- explanation is simple: when start-up costs varied significantly. Rostov-on-Don is mation on business entry is conducted, are high, it is harder for firms to open up the easiest city of the 10 to launch a busi- a detailed list of procedures is developed, in the sectors benefiting the most from ness in Russia --13 start-up procedures along with the time and cost of comply- trade openness. This friction reduces the take 22 days and cost 1.6% of GNI per ing with each procedure under normal value of greater openness. capita. Kazan is the runner-up. Perm has circumstances. Subsequently, local in- Russia improved business registra- the most burdensome start-up require- corporation lawyers and government of- tion procedures with the federal law "On ments --an entrepreneur has to carry ficials help complete and verify the data. registration of legal entities and sole pro- out 10 procedures that take 36 days and Easier start-up is correlated with prietors," adopted in 2001. Under this law, cost 2.2% of GNI per capita (table 2.1). higher productivity among existing firms. the Federal Tax Service became the main A recent study analyzing 97 countries agency for business registration. A one-stop FIGURE 2.1 Rankings on starting a business found that reducing entry costs by 80% shop (OSS) for registration was introduced. are based on 4 subindicators of income per capita increased total-factor As a result, the simplified business registra- As % of income per Preregistration, capita, no bribes included productivity by an estimated 22%. Analyz- tion had a positive impact on new entries. registration and ing 157 countries, the study found that the Between 2003 and 2004, the number of postregistration same reduction in entry costs raised output new businesses increased by 14%.4 25% 25% per worker by an estimated 29%.1 One More can be done. In 2009, Russia-- Time Cost reason for these striking productivity gains represented by its capital and most popu- 25% 25% may have been that reducing entry costs lous city Moscow--required 9 procedures Procedures Paid-in increased competition, and pushed firms that took 30 days and cost 2.7% of gross minimum Procedure is capital with lower productivity out of the market. national income (GNI) per capita to com- completed when Simpler and faster business start-up plete. It ranked 65th out of 181 economies nal document Funds deposited in a bank is received procedures make it easier for workers on the ease of starting a business. At the or with a notary before registration and capital to move across sectors when top of the global start-up charts, New Zea- Note: See Data notes for details. FIGURE 2.2 Procedures for starting a business--with and without a one- STARTINg A BuSINESS 3 Procedures and time (the Pension Fund, the Social Security ciple is not fully practiced and is limited Fund and the Fund of Mandatory Medical to information exchange between the In accordance with Russian law, local Insurance) as well as the Federal State Sta- state agencies. Because each city has its divisions of the Federal Tax Service are FIGURE 2.1 tistics Service. As part of the OSS ­once own practice for confirmations, it may Rankings to register new businesses authorizedon starting a business state registration and INN application are be faster for an entrepreneur to move the are based on 4 subindicators and issue a unique taxpayer%identifica- As of income per filed--the tax authorities send the neces- papers him/herself. In fact, sometimes Preregistration, Designated local tion number ("INN").capita, no bribes included sary information to the 3 funds and the the entrepreneur has to. In the districts registration and tax inspectors receive all required docu- postregistration statistics service within 5 working days. of Perm, for example, the 3 funds require in the 25% ments specified 25% law and register a Based on this information, the funds and the physical presence of the registrant, in up 5 working days. new legal entity Time to Cost the statistics service register the new busi- undermining the OSS concept. In some This timeframe also includes the issuance ness in their databases within 5 more other cities, letters from the 3 funds are 25% 25% of the INN. Legally, companies are identi- Procedures Paid-in working days and confirm it in a letter mailed directly to the applicant. In sum, fied by their INN instead of by name, minimum to the tax authorities within another 5 the OSS concept does not always work. is capital Procedure Russian system doesn't require a since the when completed working days. As prescribed by law, the Given the option, entrepreneurs unique trade name for registration. nal document whole sequence of registration procedures often visit the 3 funds and the statistics is received Funds deposited in a bank Tax Service now By law, the Federal or with a notary before should take no more than 4 weeks, but it service themselves in order to speed up operates one-stop shops (OSS)registration Note: See Data notes for details. which may take longer (figure 2.2). and keep track of the registration pro- include registration with 3 social funds However, the one-stop shop prin- cess. Indeed, many firms learned that FIGURE 2.2 Procedures for starting a business--with and without a one-stop shop Steps shown vertically may be performed simultaneously a. Typical one-stop shop Notarization Informing Registration Registration Opening of Tax Service 1 of signature 4 with Federal 5 with Statistics 8 9 a bank account of the bank on application Tax Service O ce account Payment Notarization of minimum of statutory 2 capital One-stop 6 documents, requirement shop bank card Payment of state Registration Production 3 with funds 7 registration fee of company seal b. Without a one-stop shop (Voronezh) Notarization Tax payer's Notarization Registration 1 of signature 4 with Federal 5 identi cation 11 of statutory on application number in District documents, Tax Service Tax Service bank card 6 Pension Fund Payment of minimum Opening of 2 capital Con rmation 9 Production 12 a bank account from funds is Social Security of company seal requirement picked up 7 Fund by company representative Fund of Informing Payment of state Registration 3 8 compulsory 10 with Statistics 13 Tax Service registration fee Medical of the bank O ce account Insurance Registering 14 with the Employment Service FIGURE 2.3 Time to start a business in Russian cities Days Registering 14 with the Employment 4 DoINg BuSINESS IN RuSSIA 2009 Service FIGURE 2.3 cost Time to start a business in Russian cities Days In accordance with the law, the duty for Rostov-on-Don 22 the state registration of a legal entity is a Irkutsk 23 flat fee equal to 2,000 rubles (US$66). Tomsk 24 Moscow is the most expensive place Voronezh 24 to register a company. In Moscow, entre- Tver 27 preneurs spend 2.7% of GNI per capita St. Petersburg 29 (6,200 rubles or $206) to complete all Moscow 30 business start-up procedures. Mean- Kazan 34 while, in Kazan, it costs just 1.3% of GNI Perm 36 per capita (3,000 rubles or $100) (figure Petrozavodsk 37 2.4). Source: Doing Business database. The two main reasons for regional cost variations are: the cost to certify the waiting for confirmation letters via mail FIGURE 2.4 days set by law for state registration--in documents required for business regis- Cost to in a business delays--well be- resultedstartsubstantialin Russian cities order to get an INN, and, as a conse- tration and the cost of opening a bank (% of income per capita) yond the envisaged 3 weeks. Some letters quence, 1 more visit to the tax inspection account, which differs depending upon Kazan 1.3 are even lost in the mail. Delays occur is often necessary. the banking services available within Rostov-on-Don 1.6 despite computerized communication In Petrozavodsk, registration proce- each city. Voronezh 1.8 between tax authorities and the funds. dures take an average of 37 days, which As a prerequisite to open a bank Irkutsk 1.9 They are often caused by state agencies' is the longest in the study. In Kazan, with account, a certification of the statutory Petrozavodsk 2.1 unwillingness to introduce modern man- 34 days, the cause for longer time is due documents is required. In principle, Tver 2.1 agement practices. to the common practice of inspecting the there are 3 ways to do it, depending on St. Petersburg 2.2 It takes 9 procedures to register a legal address declared by the applicant. the city: Perm 2.2 company in Moscow and 14 procedures While the one-stop-shop option is Tomsk 2.2 to do the same in Voronezh. One of the available in most surveyed Russian cit- 1. Get a certified extra copy of Moscow 2.7 the statutory documents with reasons for the extra steps: it is common ies--except in Voronezh and Perm--it is the tax authorities. practice in Voronezh for entrepreneurs to Source: Doing Business database. often slow, and only serves entrepreneurs visit the 3 funds and the statistics service when they are not in a hurry. For fast- This is usually the least expensive way, themselves. These visits add 4 additional track registration, many applicants do but it may first require the state registra- procedures to the registration process. In the legwork to get to the offices of the tion and therefore an additional visit to addition, while state registration takes 3 funds and the statistics service, which the tax authorities. It can take up to 5 place in the interdistrict tax inspection may be located in distant parts of the additional days and cost up to 400 rubles office, Voronezh companies must also city. Fund confirmations are the main (US$13) to receive a certified extra copy apply to their district tax inspection of- source of delays in Kazan, Perm and fice in order to get their INN, which Petrozavodsk. Those 3 cities are among box 1 Electronic digital signature adds yet another procedure in Voronezh. the slowest in completing the registration Hence, with these 5 additional steps, the process (figure 2.3). Electronic digital signature is a requisite of an electronic document used for protection OSS is not yet functioning in Voronezh In addition, most applicants visit of this electronic document from falsifica- (figure 2.2 b). their city's statistics service themselves tion. Electronic digital signature is formed by Of the 10 cities studied, starting in order to receive a confirmation letter cryptogram reformation of information with the use of a secret key of an electronic digital a business is fastest in Rostov-on-Don as soon as possible. This letter, which signature. It allows to identify the owner of where it takes only 22 days. However, for usually requires 1 to 2 days, is needed to the certificate of the key of the signature, almost half of firms another working day open a bank account and complete the as well as to ascertain lack of perversion of information in an electronic document. is needed--in addition to the 5 working registration process. Federal law of 10 January 2002 No. 1-FZ (version of 8 November 2007) "On Electronic Digital Signature" Perm 36 Petrozavodsk 37 Source: Doing Business database. STARTINg A BuSINESS 5 FIGURE 2.4 The government's initiative to set up Cost to start a business in Russian cities a national network of multifunctional (% of income per capita) centers focused on facilitating provision Kazan 1.3 of public services may turn out useful in Rostov-on-Don 1.6 expediting the registration process in the Voronezh 1.8 regions. Support by the regional/munici- Irkutsk 1.9 pal authorities could help spur business Petrozavodsk 2.1 development. It is especially important Tver 2.1 to clearly define how the confirmation St. Petersburg 2.2 by the 3 funds and the statistics service Perm 2.2 should be carried out. Tomsk 2.2 Moscow 2.7 introduce a queue manaGement system Source: Doing Business database. Crowded halls filled with registrants are of statutory documents. Some tax in- do not charge companies for opening an more often the rule than the exception in spectors in Rostov-on-Don introduced account at all. This decreases expenses Russia. There is a simple way to improve a more efficient service that makes it for the overall registration process. Usu- this: introduce a queue management sys- possible to apply, pay and get an extra ally banks' fees for opening an account tem. For instance, in Kazan, the interd- copy of certified statutory documents run between 200 rubles (US$7) and istrict Tax Service introduced a simple, simultaneously with the state registra- 3,500 rubles (US$116). orderly queue management system to tion. But even in Rostov-on-Don, this streamline service. An applicant now method will not necessarily save you an What to reform? gets a ticket with a number and waits additional visit to a notary office if your until his number is indicated on an elec- bank requires notarized signatures on improve and clearly define the tronic display. one-stop shop (oss) process your bank card. Proper functioning of one-stop shops for simplify the notarization of 2. certify the statutory business registration will save time. This statutory documents and bank card siGnatures documents by a notary office. already falls within existing legislation. This is the most expensive, albeit fastest Further publicizing by the federal agen- Allowing banks to notarize statutory way to certify documents for opening a cies of all OSS services, time limits and documents themselves instead of nota- bank account. obligations could improve the process. ries will further simplify the registration 3.present oriGinal statutory box 2 documents and Get them Benefits of an electronic business registry (e-BR) certified by a bank. Potential Users of an e-BR Potential use of e-BR services: This option can save a new company a A business owner ... ... registers a new business or lists the board of directors of a firm. visit to a notary office and reduce the A loan approval officer at a financial ... confirms the financial health and history of a cost accruing from this visit. The final institution ... potential borrowing firm and owners. cost will depends upon each bank's price A potential business partner ... ... confirms the details of a potential business list for document certification. Although partner, such as who in the company is legally banking regulations cover provisions of entrusted with signing agreements. such services to clients, very few banks A potential customer ... ... confirms historical information on the opera- offer this service in practice. Among sur- tions and management of the firms. veyed cities, banks in Kazan and selected A potential supplier ... ... confirms the financial health of a potential buyer in making trade credit decisions. banks in some other cities accept original A lawyer or notary ... ... validates information. documents for review without requiring notarization by a notary office. A government official (e.g. a tax, customs, ... verifies a company's active business status. pension, VAT or social security authority In order to build lasting relation- official) ships with corporate clients, some banks 6 DoINg BuSINESS IN RuSSIA 2009 speed up use of it technoloGies improve enterprise database box 3 and allow online start-up content and access to it Portugal's fast track business registration The study showed that the use of IT tech- There is an electronic database of enter- Users select a pre-approved name from the nologies for public services and the qual- prises in Russia, but it does not contain registry's website ... proceed to the one-stop website to ity and completeness and accuracy of in- statutory documents. Computerization register the company formation about public services remain of submitted documents as part of the ... the registry deals with tax, social security low. The Russian Government addresses registration process (with the use of and labor registration, publishes the this problem in new legal acts approved scanners) and regulated access to this incorporation notice, and ... articles of association are standard ­ there in June 2009: in the concept of the inter- information could reduce paperwork for is no need for a notary. net communication between citizens and businesses and regulators. It could help organizations with the federal, regional provide up-to-date information about Within a year, the number of companies using Fast Track rose from 12 to 75 a day. and municipal governments and in the companies for state agencies and busi- decision to provide some public services nesses while also save companies from Source: BEEnet using IT technologies starting in 2011. having to produce multiple notarized The concept specifies rules of post- copies of their statutory documents process. This service is already offered by ing data on public and municipal services (which are needed in each interaction selected banks, but it does not yet appear in Federal Public Information Systems with the government and other agencies. to be a widespread practice. Offering no- "Consolidated Register of Public and Mu- Box 2). Finally, an accessible, electronic tarization services by commercial banks nicipal Services (Functions)" and "In- database could simplify the work of the is a common practice in developed mar- tegrated Portal of Public and Municipal tax authorities responsible for certifica- ket economies. Another approach to cut Services (Functions)". The public services tion of statutory documents, as in Por- red tape would be canceling mandatory to be provided with the use of IT tech- tugal (box 3). notarization and making use of notaries nologies include among other the state optional. registration of legal entities and indi- eliminate company seals vidual entrepreneurs, management of the Is a company seal really needed to miti- abolish the paid-in minimum Unified State Registry of Legal Entities gate the risk of fraud, or is it just a capital requirement and Individual Entrepreneurs, customs tradition? Many countries do not have In 2009, the paid-in minimum capital procedures, title registration, cadastre mandatory seals for business operations requirement for Russian limited liabili- registration, some types of licenses, etc. anymore, reducing the time and proce- ties companies was 10,000 rubles or 2.2% Electronic document processing and dures for start-ups. of GNI per capita. This amount must be online registration would facilitate start- paid in full during the 1st year of oper- ups. In Denmark an entrepreneur can eliminate the requirement of ations--with 50% required even before start a business without leaving home. an information letter from the federal state statistics service the state registration. This requirement Using the Internet, the entrepreneur for openinG a bank account can be an obstacle for smaller businesses, can obtain a digital signature, register An information letter from the statistics which are expected to be important driv- with a commercial registry and tax au- service is currently required in order to ers of the Russian economy, employing thority and then submit incorporation open a bank account. Getting this letter a significant portion of the population. documents. All data is automatically val- adds another step to the registration pro- Elimination of this requirement could idated--no public officials are involved. cess. In practice, an applicant chooses his increase the number of registered com- An entrepreneur receives a business iden- activity statistics codes for his registra- panies, as it happened in many reforming tification number online, and a company tion application himself using an official countries as well as in developed market notice is published on the web. Online manual. An information letter from the economies--namely, in Canada, France, start-up works best in countries with statistics service is not really necessary Japan, the United Kingdom, and the high Internet penetration and appropri- for registering a firm or for opening a United States where removal of paid-in ate legislation allowing digital signatures. bank account. An efficiently run OSS minimum capital requirement greatly Electronic digital signature was envisaged could share information about a new facilitated business start-ups.5 by the Russian legislation in the Federal business, including information about its Law dated January 10, 2002 (No. 1-FZ statistics codes, electronically. "On Electronic Digital Signature" (box 1), but it is not used very broadly yet. STARTINg A BuSINESS 7 1. Bruhn (2007). 2. Ciccone and Papaioannou (2007). 3. Freund and Bolaky (forthcoming), Chang.Kaltani and Loayza (forthcoming), Cunat and Melitz (2007), Helpman and Itskhoki (2007) and Helpman, Melitz and Rubinstein (2008). 4. Doing Business 2005. 5. Business Registration Start-Up: A Con- cept Note, Liliana de Sa, IFC/World Bank, October 27, 2005. Dealing with Table 3.1 Where it is easy to build a warehouse-- construction and where not? 1 Rostov-on-Don (easiest) permits 2 Kazan 3 Irkutsk 4 Perm 5 Petrozavodsk 6 Tomsk 7 Tver 8 St. Petersburg 9 Voronezh 10 Moscow (most difficult) Source : Doing Business database. Doing Business studies the procedures, 16.15% and construction spending for The code sets strict deadlines, but time and cost to obtain construction- local governments by 5.7%.1 Yet in 80 Russian regulators emphasize rigorous related approvals and connect a standard of the 181 economies studied by Doing supervision and control without con- commercial warehouse to utilities. The Business, compliance with construction sideration for the burden on the end rankings for dealing with construction formalities takes longer than the stan- users. Appropriate construction regula- permits are based on 3 equally weighted dardized 30-week construction project tions require the relevant authorities to (33.3%) sub-indicators: (1) the number itself. Russia, represented by Moscow, is review projects for safety, health and of calendar days spent processing the pa- within this group. It ranks 180th out of environmental reasons, but they also perwork related to permits, (2) the cost the 181 economies surveyed by Doing make compliance easy for builders. In expressed as a percentage of income per Business 2009. Russia, every step of the process--from capita (for official payments only) and If Russia's existing laws were en- design to registration--is likely to re- (3) the number of procedures necessary forced, dealing with construction permits quire a thick folder of documents, a bribe to receive the final document--i.e., the should not be so burdensome. According and just the right stamp. This has turned registration certificate of a newly built to the urban development code, acquir- what should be a simple administrative warehouse (figure 3.1). ing construction and occupancy permits transaction into an opaque, costly, itera- Governments must strike a balance should be easier than most other admin- tive process. between protecting the public and en- istrative procedures. The code stipulates For several years, Russia has been couraging business to build and formally that the authorities must issue a con- the runner up to the last place in the register the property. Stricter building struction permit within 10 calendar days Doing Business global ranking for dealing rules and regulations may result in fewer from the date an application is submit- accidents, if enforced effectively. But ted. When an entrepreneur decides what FIGURE 3.1 where the process is too burdensome, (s)he wants to build, (s)he just needs to Rankings on dealing with construction permits are based on 3 subindicators fewer projects get started in the formal put it in writing and attach the support- Days to process As % of income per capita, sector and/or for those projects which ing documents. When the building is permits for building no bribes included follow the permitting process to its end, complete, the entrepreneur supposedly a warehouse the corruption burden increases. just brings in another application and, 33.3% 33.3% Economies that score well on deal- again in no more than 10 days (reserved Time Cost ing with construction permits tend to for inspectors to verify conformity of the have transparent and rigorous yet expe- erected building with the construction 33.3% Procedures ditious permitting processes. Speed mat- permit issued earlier), the occupancy ters. A recent study in the United States permit is ready for pick-up. By law, con- shows that accelerating permit approvals struction and occupancy permits are free Procedure is completed when nal document is received; construction permits, inspections by 3 months in a 22-month project cycle of charge.2 But reality of getting both and utility connections included could increase property tax revenue by documents is very different. Note: See Data notes for details. FIGURE 3.2 DEAlINg WITH CoNSTRuC TIoN PERmITS 9 with construction permits. In fact, Rus- perform better than Moscow, which rep- (Rostekhnadzor) is the only authority sia has the world's most complex require- resented Russia in the global ranking in the country to inspect and clear the ments for clearing building documents. of Doing Business 2009. International commissioning of hazardous, complex In Russia, represented by Moscow, comparisons based on the results of this and unique structures in all Russia's re- it takes 704 days (almost 2 years) to subnational report are interesting. For gions. But the city of Moscow negotiated complete the paperwork to build a ware- example, in Rostov-on-Don (1st place exceptions to this rule. When a dispute house.3 To compare, builders in OECD within the Russian Federation and 129 arose between the Moscow's government countries spend, on average, 162 days-- globally), it is as easy to build a ware- and a steel plant regarding the quality of less than a quarter of the time required in house as it is in Portugal. Meanwhile, a metal part delivered for use in one of Moscow. Moscow builders face a burden- the procedures and costs required in the largest indoor skating stadiums in some environment by regional standards, Voronezh (ranked 9th in Russia and 176 Europe, the Moscow's government did too: in Eastern Europe and Central Asia globally) are as cumbersome as they are not want to resolve the dispute through builders spend an average of 257 days to in Zimbabwe or Liberia. Finally, as noted the national regulator. Instead, it wanted process a construction permit, just over a above, Moscow stands out as the most to turn to an "independent" city commis- third of the time required in Moscow. difficult place to build (table 3.1). sion--yet two-thirds of this commission The number of procedures required Dealing with construction permits came from organizations taking part in in Moscow is the highest in the world at is easier for entrepreneurs in regions this same skating stadium construction 54. These 54 steps mandate that a builder where authorities are more active in the project, picked by the city government. 6 interacts with at least 21 different regula- drafting of regional service standards tory agencies. To compare, OECD coun- (within the existing urban development Procedures and time tries require 15 procedures, on average, code) and are able to strike a better bal- while the ECA region's countries require ance between guarding the public inter- There are wide regional variations in the 27, on average. est (particularly in safety and health) number of procedures, time required Long approvals and numerous and reducing the bureaucratic burden and cost incurred to process paperwork regulations do not guarantee quality in on businesses. In larger cities, regula- needed to build a standard warehouse in construction and urban development as tors tended to emphasize the shortcom- Russia (table 3.2). demonstrated by spectacular collapses of ings of federal law and implement extra For example, dealing with construc- recently raised structures in Russia.4 procedures to suit special circumstances tion permits requires 22 procedures in Looking at costs, Moscow builders (and, perhaps, a group of affiliated devel- Rostov-on-Don and twice as many in must spend 26 times (2,613%) the gross opers). But these additional procedures Tomsk. The 22-step difference can par- national income (GNI) per capita to have do not generally benefit the business tially be explained by the fact that it is all permits cleared. In the Eastern Eu- community at large. For example, by necessary to deal with 2 separate com- rope and Central Asia region, building law, the Federal Service for Ecological, panies for electricity and another 2 com- permit costs come to a less onerous 7 Technological and Nuclear Supervision panies for water connections in Tomsk. times (680%) GNI per capita. In OECD Table 3.2 countries, such costs come to half (57%) Ranking of Russian cities on dealing with construction permits GNI per capita.5 Ease of dealing Cost with construction Since much of urban planning, zon- Procedures Time permits (% of income per ing and building design falls under local City (number) (days) capita) (rank) or regional jurisdictions in Russia, sub- Rostov-on-Don 22 194 272.9 1 national authorities normally take the Kazan 23 350 396.1 2 lead in implementing reforms to simplify Irkutsk 26 304 487.4 3 the regulation of construction in their Perm 24 263 1,060.2 3 regions. Federal laws merely provide a Petrozavodsk 28 365 270.3 3 framework for the municipal authorities Tomsk 44 233 502.1 6 who issue construction and occupancy Tver 26 390 826.9 7 permits according to regional and mu- St. Petersburg 29 299 2,116.2 8 nicipal service standards. Voronezh 48 1,207 399.1 9 In dealing with construction per- Moscow 54 704 2,612.8 10 mits, all other Russian cities surveyed Source: Doing Business database. and utility connections included Note: See Data notes for details. 10 DoINg BuSINESS IN RuSSIA 2009 FIGURE 3.2 the global Doing Business 2009 report, Too many clearances before breaking ground Number of procedures found this legal provision insufficient Rostov-on-Don for construction within its city limits 22 Kazan Pre-construction and so continued to require state review 23 FIGURE 3.1 Perm Construction for a 1,300 m2 warehouse. Such a re- 24 Rankings on dealing with construction view carried out by the city organization permits Tver based on 3 subindicators are 26 Utility connection Irkutsk Post-construction "Mosgosekspertiza" takes up to 60 days Days to process As % of income per capita, 26 permits for building Petrozavodsk no bribes included and cost 58,000 rubles (US$1,928) to 28 a warehouse St. Petersburg complete. The statutory ordinance by the 29 Tomsk 33.3% 33.3% 44 mayor of Moscow for Mosgosekspertiza Voronezh Time Cost 48 states that its review is "a mandatory Moscow stage of the investment process in the 54 33.3% city construction" without any reference Procedures Source: Doing Business database. to exceptions--per provisions in article 49 of the urban development code. Under companies Furthermore, the utilitynal document do Procedure is completed when FIGURE 3.3 construction permits, inspections By adopting the federal urban devel- this technical review, compliance with is received; Moreutility connectionswith one another, forc- than 3 years included not communicateto complete procedures in Voronezh code, Russia introduced a risk- and opment state construction standards ("SNiPs")-- Time (days) notesto shuttle between them to ing applicants for details. Note: See Data based approach to its permitting process as well as adherence to project plans--is Rostov-on-Don confirm connections. 194 in construction. The code separated per- then verified by the supervisory body Tomsk Pre-construction The situation is most challenging 233 mit applications for smaller, lower risk "Mosgorstroinadzor"8 at 3 points: (1) Perm 263 Construction in Moscow, where 36 steps are required projects from larger, higher risk ventures. upon completing of the basement, (2) FIGURE 3.2 Utility connection St. Petersburg before ground is broken in a 299 ground It abolished government review of docu- construc- upon erecting above surface structures, Too many clearances before breaking Irkutsk By the time the304 tion project. Post-construction building mentation for stand-alone buildings of no and (3) upon commissioning equipment Number of procedures Kazan 350 is complete and properly registered, 54 22more than 2 stories with a total surface and engineering works. Rostov-on-Don Petrozavodsk separate procedures should have365 area Pre-construction been 23 of no more than 1,500 m2 intended In May 2008, Mosgorstroinadzor was Kazan implemented Tver (figure 3.2). For example,390 non-production for non-residential andConstruction supervising 3,611 construction sites and Perm 24 Moscow a location permit in Moscow is actually use. The704hypothetical warehouse of the Utility connection was struggling to send inspectors to all Tver 26 Voronezh comprised of 5 permits7 which are not Doing Business case study benefits from 1,207 Post-construction these sites each week, hardly a realistic Irkutsk 26 required by the federal urban develop- this reform, allowing builders to skip sev- Petrozavodsk Source: Doing Business database. 28 target. From the public interest point of ment code. In fact, regulators in Moscow St. Petersburg eral steps, including: (1) the state review 29 view it would have been more effective seem to find the federal urban develop- ("expertiza") of construction projects be- Tomsk 44 to focus attention of inspectors on more ment code "insufficient". Proposed Mos- fore the building permit is issued; and (2) Voronezh 48 risky projects leaving other smaller sites code, cow's Moscowinstead of simplifying build- inspections to verify compliance with the 54 to compliance verification at issuing oc- ing regulations, adds requirements and approved project during construction. cupancy permit as required by the fed- Source: Doing Business database. makes them more complex. Moscow's government, according to eral urban development code. As mentioned above, Rostov-on- FIGURE 3.3 Don and Kazan are the easiest places in More than 3 years to complete procedures in Voronezh Russia to build a warehouse with fewer Time (days) procedures than the average 24 proce- Rostov-on-Don 194 Pre-construction dures for other cities in Eastern Europe Tomsk 233 Construction and Central Asia. The other Russian cit- Perm 263 ies covered in this report require more St. Petersburg 299 Utility connection procedures. Irkutsk 304 Post-construction Too many steps signal excessive Kazan 350 red tape, particularly if there is lack of Petrozavodsk 365 transparency as to what comes next. In Tver 390 Tomsk, regulators go the extra mile to Moscow 704 clearly explain their procedures to the Voronezh 1,207 public. This useful information seems to Source: Doing Business database. have compensated somewhat for a higher DEAlINg WITH CoNSTRuC TIoN PERmITS 11 number of procedures required (44). Al- an entrepreneur pays less than 910,000 What to reform? though Tomsk sits near the bottom of rubles (US$30,253) to connect the stan- the list (8th place) for the high number dard warehouse consuming 140kW to improve the risk-based approval of procedures required, it climbs to 2nd the power line.10 In St. Petersburg, the process place when compared to the number of total amount to be paid increases to In accordance with the federal urban days spent on paperwork (figure 3.3). 2,452,000 rubles (US$81,516)--which development code, technical reviews and In Voronezh, the city with the means it's 5 times the unit cost (per inspections of smaller projects were not longest wait (1,207 days), 300 days are kilowatt) found in Irkutsk. That electri- required--allowing business to save time needed to clear the building application cal connection helps hike St. Petersburg and costs in the permitting process with- with municipal authorities. But the main total connection costs to 4,628,400 rubles out compromising public safety, health source of delay (averaging 365 days) is (US$153,870). But nowhere in Russia is and environment. Skipping cumbersome the negotiating and signing of the terms it as expensive as in Moscow to hook up reviews and excessive inspections helps of construction. These "terms" include to the grid: Moscow's electrical connec- smaller, less risky projects--such as the an agreement to gratuitously transfer tions cost 6 times as much as Irkutsk's. warehouse of our study--get built with- to the account of a city ward where That comes to 39,218 rubles (US$1,304) out undue delay. the warehouse is to be built an agreed per kW capacity--and the total cost of Regional governments could speed amount (in cash) for urban develop- 5,490,520 rubles (US$182,531) should be up the approvals of relatively small, low- ment purposes. Entrepreneurs tend to paid upfront in full to bring power to a risk, commercial projects by separating spend time deciding how to address this warehouse in Russia's capital city. Other applications into more than 2 types. For cash payment requirement since the law cities allow delayed payments, with only example, construction projects of less forbids charging fees for issuance of con- a portion of the total payment made than 100 m2 are fast-tracked in Peru, struction permits. within 30 days of signing the connection Colombia and other Latin American agreement. The remainder--up to 50% counties with positive results. In fact, in cost of the connection fee--is often permitted Peru's capital Lima, it took 320 days to to be paid later. For example, in Kazan deal with construction permits before Building tends to be less expensive in the remainder can be paid up to one the aforementioned reform. But after smaller cities and more expensive in year later. expediting small-project approvals, that larger ones due to the higher cost of con- While entrepreneurs pay nearly time was cut to only 20 days.12 struction materials and labor. Electricity 40,000 rubles per kW capacity in Mos- connection charges have increased in the cow,11 no charges for electrical connec- facilitate small and medium aftermath of the national electricity sec- tions are reported in neighboring Tula enterprises' access to utilities by lowerinG costs tor restructuring and have become one Oblast, just 130 km south. Due to a re- of the most important factors affecting cent restructuring in the electricity sec- Connecting to the electrical grid has building permit costs. tor, connection charges are now levied loomed as one of the most serious prob- Electrical connection fees, modest by regional electricity commissions and lem related to construction in Russia's before 2006, skyrocketed in 2007. Ac- are at the discretion of regional govern- regions since 2007. Connection costs cordingly, the costs related to building ments. As a result, electricity charges are particularly burdensome for small a warehouse rose in Moscow from 318% vary--contributing up to 10.5% of total and medium-sized enterprises (SMEs) so of GNI per capita in 2006 to 3,788% GNI costs in Irkutsk while making up to 21% the government is planning to establish per capita in 2007 (almost 6 million of total costs in St. Petersburg and Mos- lower rates for them. rubles, or almost US$200,000).9 In fact, cow. When connection charges surpass President Dmitry Medvedev, in his due to elevated electricity rates 92% of the cost of hooking up a generator, large ordinance on urgent measures to liqui- total construction permit's cost struc- developers may opt to install generators date administrative barriers in entrepre- ture is attributable to power connection for their own use instead of waiting for neurial activities (# 797, dated May 15, charges. capacity on the grid to be freed up. 2008), instructed the government to sim- In Irkutsk, with its abundant energy plify procedures for SMEs connecting to resources and the least expensive elec- electricity networks and make them less tricity supply nationwide, connecting one expensive. One of the proposals on the kilowatt (kW) capacity to the grid costs table is to develop rules for connecting only 6,500 rubles (US$216). As such, 4 major consumer groups to the grid: 12 DoINg BuSINESS IN RuSSIA 2009 (1) households, (2) small businesses, industries--starting January 2010--and consider creatinG one- stop shops for parts of the (3) medium-sized businesses and (4) accept qualified professionals into mem- permittinG process large businesses with energy-intensive bership. The current lack of SROs in the production. The proposed connection system means much work is to be done It is much easier to establish a one-stop charge for small businesses is set as low to ensure that professional standards are shop for permits when there are only 3 as 550 rubles per kW. This would reduce maintained as well as they are in other organizations involved. When the total the current financial burden on busi- market economies. Development of open number of players reaches double digits nesses but if the charge does not reflect and responsible SROs should be a pri- (in a 58-step process), a one-stop shop full costs the resulting financial losses ority. Members of these organizations becomes untenable. A single shop could, are likely to be recouped from charge in- should be fully liable for the projects however, cover a specific stage of the creases for other groups of consumers, or they are designing and erecting. To this process--say, design development and/ in other words through cross-subsidies. end, a new section was recently added or construction permits. For example, Overall, regional offices of the Federal to the federal urban development code "Mosgorstroinadzor" (the construction Tariff Service, which are in charge of and now the main challenge is to ensure supervision body of Moscow) boasts a setting up specific connection charges, that membership in the SROs does not single window for permit applications need to make connection procedures discriminate against smaller companies and this is a positive step forward (even transparent and based on the publicly which should not be left outside of these though Mosgorstroinadzor concedes that available methodologies for computing organizations due to high membership it currently has hard time meeting the connection charge, as well as to establish thresholds. 30-day statutory time limits to process a process for appeals in case of prolonged applications). delays in access. expedite the city planninG, Kazan's Directorate of Architecture zoninG and infrastructure and Urban Development spells out on development for auctioninG deleGate the approval for plots of urban land fully its website the lead times (in number simple projects to private prepared for business of days) required by each of its units professionals establishment to process documents and explain the With its strong professional corps of Cities' urban development plans and document flow. According to the Direc- architects and engineers, the state could zoning maps are currently prepared with torate staff, this transparency reduces delegate approvals to private profession- long lead times. Often, the burden of the risk that a one-stop shop becomes als. Simple, low-risk projects could be large territorial plans lies on a developer a black hole--which happens if an ap- outsourced to licensed professionals who trying to make a smaller investment. plicant cannot find out exactly where a would approve and be held account- Compensation for territorial develop- pending file is stuck. able for projects under their purview. ment by future land-users would help For example, in Colombia the private expedite land allocation for construction. increase transparency and in- formation and allow for online sector is encouraged to participate in Such a mechanism could become part applications provision of public services, including by of the land auctioning process, where taking the function of verifying compli- the buyer of a plot of land compensates Information about obtaining a build- ance with the building standards. A net- territorial planning costs to the original ing permit helps businesses with their work of private practitioners ("municipal developer. project planning. It does not require a lot curators"13) are authorized to examine Another positive initiative is the of resources--only a willingness to post applications for construction permits on development of industrial parks and requirements for the public to view. Else- compliance with national standards and other public-private partnerships offer- where in the world--in Oman and Sin- rules and to actually issue such permits ing power, water, road and other infra- gapore, for example--free downloadable on behalf of the municipalities structure connections in one real estate application forms and online document Recently, the government of Russia package. The Republic of Tatarstan and processing save builders time and money. decided to replace its centralized system Leningrad Oblast are among the leaders In Russia, having forms available online of licensing of construction and design in the development of industrial parks could save businesses at least one trip to activities with a market-based system within Russia. the municipality--and that could mean made up of self-regulatory organizations saving an afternoon stuck in traffic. (SROs) which would screen entrants into When getting a construction permit the building construction and design is as complex as it is in Moscow, any ini- DEAlINg WITH CoNSTRuC TIoN PERmITS 13 tiative to simplify and make it transpar- 8. Since 2006, fines collected by Mosgor- stroinadzor surpassed 20 million rubles ent should be welcome. Billboards fea- (US$700,000). Those fines were paid by turing the building permit requirements construction firms--167 of which were could help. Websites could enable entre- blacklisted and recorded into the agency's preneurs to access useful information "Register of business reputation" for (1) littering, (2) putting dirt onto areas adja- any time of day. But builders also need cent to construction sites, (3) incorporat- more than just a checklist of required ing low-quality construction or (4) using documents. They need downloadable ap- inadequate materials. Source: www.irn. ru/news/prn/25447.html accessed in plication forms and they need to under- January 2009. stand how the process works. This could 9. Doing Business 2008, Russia report (com- make dealing with construction permits paring regulation in 178 countries) p. 14. easier throughout Russia. 10. The charge tends to be calculated based on the declared electricity consumption for different classes of consumers (com- mercial vs. residential), depending on their location (town center, suburban, 1. PriceWaterhouseCoopers, 2006. rural) and required reliability of service 2. Urban Development Code of the Russian (first, second or last to be disconnected Federation. Federal Law No.190-FZ, De- when there is a threat of a blackout). cember 24, 2004, Articles 51 55. Yur- 11. In downtown Moscow the connection right, Moscow, 2007. charges for businesses are even higher, 3. See Data Notes describing the case used i.e., 90,000 ­ 100,000 rubles per kW ca- here to compare the cities in this study. pacity. 4. For example: roofs collapsed in an aqua- 12. Source: http://www.tv.munlima.gob.pe/ park and a produce market in Moscow, sislico/ accessed in December 2008. the walls of a swimming pool fell in the 13. The number of "municipal curators" is Perm region, and pillars of a highway determined by demand -- there are 5 ramp collapsed in Ekaterinburg. All 4 curators in the capital city of Bogota who incidents resulted in the loss of human are licensed to work on all the territory lives and all 4 were due to violations of of the capital competing on quality of construction and maintenance norms. service (fees for services are regulated). In In addition, construction falling short of smaller cities the number of such agents anti-seismic requirements led to the de- is smaller, but not less than 2 (to allow for struction of 8,000 people's homes on Rus- builders' choice). In municipalities with sia's Sakhalin Island after an earthquake populations of less than 100,000 where in 2007. building activity can not support, at least, 5. Doing Business 2009 database. 2 curators construction permits are issued 6. Source: Gazeta.ru, September 29, 2008. by the municipalities and outsourcing of services related to compliance verification 7. The 5 permits are: (1) act of permitted is not allowed by law. use, (2) decision of district land com- mittee, (3) latter's clearance by the head of the city's ward, (4) conclusion on its compliance with city planning, followed by (5) clearance by the city architecture planning department. Registering Table 4.1 Ease of transferring property in Russia property Cost Procedures Time Cost Cost (% of property City (number) (days) (rubles) (US$) value) Rank Tver 6 48 18,462 613.76 0.16 1 Kazan 5 80 16,706 555.39 0.15 2 Perm 6 51 22,700 754.65 0.20 3 Petrozavodsk 7 52 20,420 678.86 0.18 3 Tomsk 6 47 26,778 890.23 0.24 5 St. Petersburg 6 117 18,856 626.86 0.17 6 Moscow 6 52 23,166 770.15 0.20 7 Irkutsk 6 51 27,189 903.89 0.24 8 Voronezh 5 56 30,505 1,014.13 0.27 9 Rostov-on-Don 5 61 40,360 1,341.76 0.35 10 Source: Doing Business in Russia 2009 database. Doing Business tracks the full sequence ease of registering property tend to have Procedures and time of procedures necessary for a business simple procedures, low transfer taxes, (buyer) to purchase a property (a land fixed registration fees, online registries In 2006, one of the first public ser- plot and a building located on this land and time limits for administrative proce- vice standards (called "reglaments") plot) from another business (seller) and dures. They also make the use of notaries approved and implemented as part of to transfer the property title to the buy- and lawyers optional. ongoing administrative reform in Russia er's name so that the buyer can use the Russia, represented by Moscow in provided for how real estate property property to expand its business, take out the global Doing Business study, ranks should be registered.2 By law, registration a new loan with the property as collateral 49th among 181 economies on the ease with the authorized government agency or sell the property to another business. of transferring property. It takes 6 pro- takes 1 month and costs 7,500 rubles for The process starts with obtaining the cedures, 52 days and costs 0.2% of the legal entities. Regional variations occur necessary documents--such as a copy underlying property value to transfer mostly in the document preparation of the seller's title, if necessary--and the title of a warehouse in the periur- stage, rather than in the property trans- conducting due diligence, if required. ban area of Moscow. This is significantly fer process at the registry. An expedited The transaction is considered complete cheaper than in OECD countries where, registration is envisaged for critical cases when the buyer can use the property as on average, an entrepreneur pays 4.7% of at the same price. collateral for a bank loan (figure 4.1). the property value to complete a formal The number of procedures required Land is a fundamental economic transfer. Yet, transferring property in to transfer a property title varies from 5 asset and a major source of wealth in Moscow is slower than in most capitals in Voronezh, Kazan, and Rostov-on-Don every society. Land and buildings ac- of OECD countries where, on average, it FIGURE 4.1 count for between half and three-quar- takes 5 procedures and 30 days. Rankings on registering property ters of the wealth in most economies.1 It Despite a common regulatory frame- are based on 3 subindicators serves as a commodity that landowners work for property registration across the Days to transfer property As % of property value, can turn into capital and use as collat- Russian Federation, the time, cost and between 2 companies no bribes included eral to obtain credit. The more difficult number of procedures vary in the 10 cit- property registration is, the more as- ies evaluated in this report due to local 33.3% 33.3% sets remain outside the formal economic practices and fees. In Tver it is easiest Time Cost system. Unregistered property cannot to register property. It takes 48 days and be used as collateral for loans, which costs 0.16% of the property value to com- 33.3% Procedures may limit financing opportunities for plete a title transfer. On the other end of businesses. Furthermore, property val- the scale, Rostov-on-Don has the most ues tend to be lower without formal titles cumbersome procedures. It takes 61 days Steps for encumbrance checking, deed and title transfer until property can be sold again or used as collateral and property owners invest less. and costs 0.35% of the property value to Economies that score well on the complete a title transfer there (table 4.1). Note: See Data notes for details. FIGURE 4.2 Time required for property title transfer varies among Russia until property can be sold again or used as collateral Note: See Data notes for details. REgISTERINg PRoPERT y 15 FIGURE 4.2 Time required for property title transfer varies among Russian cities · With the transfer to a unified federal Days system, staff salaries were cut leading Tomsk 47 to a drain of personnel. As a conse- Tver 48 quence, the workload increased per Perm 51 FIGURE 4.1 employee. Irkutsk Rankings on registering property 51 · Lower salaries hurt recruitment ef- based are Moscowon 3 subindicators 52 forts for the most competent profes- Petrozavodsk property Days to transfer As % of property value, 52 between 2 companies no bribes included sionals. Voronezh 56 · In many cities, property registrations Rostov-on-Don 61 33.3% 33.3% were computerized. However, person- Kazan 80 Time Cost nel remains insufficiently trained to St.Petersburg 117 promptly file documents in the new 33.3% Source: Doing Business database. systems. Procedures to 7 in Petrozavodsk. In Petrozavodsk, property. However, the study revealed FIGURE 4.3 cost cities Cost of property transfer varies among Russiansubstantial differences. While it takes 47 the seller is required to deed and title plan Steps for encumbrance checking, obtain a transfer (% of property value) until property can be sold again or in addition certificate ("plan-spravka") used as collateral days to transfer a property title in Tomsk, Companies spend an average of 24,514 Kazan 0.15 a See Data notes passport"--a plan and it takes 117 days--almost 3 times long-- to Note:"technical for details. rubles (US$815) to transfer a property Tver 0.16 property description for a building. Both in St-Petersburg (figure 4.2). title in Russia. This is one of the 10 low- St.Petersburg 0.17 come from the Republican State Centre Some complain that the registra- est fees as a percentage of the property Petrozavodsk 0.18 "Nedvizhimost." It adds to the procedural tion offices are backlogged, causing long FIGURE 4.2Perm value in the world. Property registration 0.20 Time required for property the rankings among Russian to address this problem, requirements observed fortitle transfer varieswaits. In order cities fees are prescribed by federal law; there Moscow 0.20 in this report. Days the registration office in Tomsk, for ex- are no current plans to expedite registra- Irkutsk 0.24 Tomsk variations are also seen 47ample, has made it possible to book a Regional tion for higher prices. The cost among Tomsk 0.24 Tver in the procedures related to receiving 48visit by phone. the surveyed cities varies from Kazan's Voronezh 0.27 excerpts Perm the Unified State Register from 51 While the time needed to register 16,706 rubles (US$555) to Rostov-on- Rostov-on-Don 0.35 of LegalIrkutsk In most of the surveyed Entities. with the Federal Registration Service is 51 Don's 40,360 rubles (US$1,342) (figure cities, Moscow database. optional and may capped at 1 month by law, in practice it this excerpt is Source: Doing Business 52 4.3). The variation in costs is caused Petrozavodskby the buyer, seller or both be obtained is much longer--representing up to 80% 52 mainly by the following factors: Voronezh in order to verify compliance with the of the overall property transfer process. It 56 The price to prepare technical in- Rostov-on-Don this excerpt is mandatory law. However, 61 takes the least amount of time in Kazan ventory documents (a "technical pass- Kazan in some cities. 80 (20 days) and the most in St. Petersburg port") is usually set by each organization St.Petersburg On average, for the 10 selected Rus- (95 days) due to its lack of capacity. There 117 involved according to the complexity of sian cities, it takes 62 days to register are several reasons for this situation: conducted works as well as the time- Source: Doing Business database. frame. As a result, it varies significantly FIGURE 4.3 across the country. Cost of property transfer varies among Russian cities While in some cities (e.g. Kazan and (% of property value) Voronezh) it is sufficient to submit copies Kazan 0.15 authorized by a registration office (along Tver 0.16 with original documents), in other cities St.Petersburg 0.17 (e.g. Irkutsk and Petrozavodsk) nota- Petrozavodsk 0.18 rized copies are required by the property Perm 0.20 registration body. Notarized copies add Moscow 0.20 to costs. Irkutsk 0.24 Notary fees can range from 10 rubles Tomsk 0.24 (US$0.3) per page to 500 rubles (US$17) Voronezh 0.27 per document in the cities surveyed. Rostov-on-Don 0.35 Source: Doing Business database. 16 DoINg BuSINESS IN RuSSIA 2009 What to reform? combine the two aGencies responsible for land and buildinGs manaGement and title Since 2004, Doing Business reports have transfers into one 1. Fleisig, Safavian and de la Peńa (2006). recorded over 100 countries that have While land management is conducted 2. Federal Law of 21 July 1997 No. 122-FZ "On State Registration of Rights and made it easier to register property. The by the Federal Cadastre Agency of Real Transactions with Real Estate" and Order most successful reforms included the Estate Property ("Rosnedvizhivost"), a of the Ministry of Justice of Russia of 14 following solutions: title transfer is registered by the Federal September 2006 No. 203 "On Approval of Administrative Reglament of Imple- Registry Service. The overlap between mentation of State Function on State Re- make the use of notaries optional these state bodies is significant. It would gistration of Right and Transactions with In some cities, the offices of the Federal be more efficient to unify the agencies Real Estate". Registration Service have already intro- under one umbrella. Good news: as this 3. The Federal Service of Registration, Ca- dastre and Cartography was established duced practices to allow a company to report was being prepared, a Presidential in December 2008 on the basis of the submit either notarized copies or origi- Decree3 was signed to combine these two Federal Registry Service, the Federal nals of necessary documents along with functions into one agency by 2011. Cadastre Agency of Real Estate Property ("Rosnedvizhivost") and the Federal copies which are checked against the Agency on Geodesy and Cartography. By originals and sealed by an officer of the introduce incentive mechanisms Order of the Russian Federation Presi- Federal Registration Service. Making this and traininG to improve dent of 25 December 2008 No. 1847 "On personnel option more widely available in Russia Federal Service of the State Registration, Cadastre and Cartography". could substantially reduce the time and Additional training-- including IT and cost of title transfers. customer service courses--for registry personnel is required to streamline the reduce the number of necessary process of property registration. At the documents and clearly define same time, it may be advisable to intro- the document packaGe duce incentive mechanisms when em- Companies need to submit about 20 ployees perform better, faster, and more documents to complete a title transfer efficient document processing. in Russia. In addition, there may be variations in requirements among Rus- introduce fast track sian cities--as noted with the request reGistration procedures to submit an excerpt from the Unified Though legislation foresees expedited State Register of Legal Entities. In New registration procedures, they are not yet Zealand--the country with the easiest available in most of the cities surveyed. property transfer procedures--compa- Sometimes entrepreneurs are ready to nies only need to submit 4 documents to pay more to complete their property complete a title transfer. registration faster. Enforcement of the official fast-track procedures could also increase state revenues. Trading FIGURE 5.1 Rankings on trading across borders across are based on 3 subindicators All documents required Document preparation, borders by customs and customs clearance and other agencies technical control, ports and terminal handling, inland transport 33.3% 33.3% and handling Documents Time to to export export and import and import 33.3% Cost to export and import US$ per 20-foot container, no bribes or tari s included Note: See Data notes for details. Doing Business measures the time, cost tural products the cost amounts to nearly tainer of goods, a trader in the northern FIGURE 5.2 and number of documents required to 3% of the volume of trade for each day's capital requires 8 documents that take Top 5 reform features in trading export and import a standard shipment delay. One study finds that each extra sig- 26 days to complete and cost US$1,350. across borders of goods by sea through the bench- nature an exporter has to collect reduces To import a standardized container Reforms including feature since DB2006 (%) of marked location's closest seaport. Every trade by 4.2%. For high-end exports the goods, the same city requires 13 docu- 45% official trade procedure is tracked--from loss is nearly 5%.1 ments that improved electronic Introduced or take 24 days to complete and the contractual agreement between the The 10 cities in Russia studied by data interchange system 5.1). cost US$1,400 (table 2 parties to the delivery of the traded Doing Business show a significant vari- 38% The first of the 3 components used goods (figure 5.1). ance. Moscow ranks 161 out of 181 econ- Improved customs administration to measure the ease of trading across Simple, efficient and easily enforced omies. It takes 36 days and US$2,150 to borders is the number of documents 35% trade regulations are important for fa- export and import a standardized con- required to import and export. Russia Introduced risk management techniques cilitating investment, boosting trade and tainer of goods. In addition, a trader has imposes some of the most complex docu- enhancing economic growth. Burden- to prepare 8 export documents and 13 ment requirements in the world. Approv- 29% some regulations lead to delays in trad- import documents to complete import/ als from ministries, or infrastructure Improved port procedures health authorities, ing and undermine a country's global export formalities. inspections agencies, port authorities 14% competitiveness. A recent study of 126 Compared to other Russian cities, and banks account for a significant por- Introduced border cooperation agreements economies calculates the loss from ex- Moscow comes out at the bottom. St. Pe- tion of the trade delays observed in Rus- port delays at around 1% of trade for tersburg comes out on top in the regional sian reform may Note: Acities. include several reform features. Source: Doing Business database. each extra day. For perishable agricul- ranking. To export a standardized con- Although it takes the same 8 docu- Table 5.1 Trading across borders in Russia is not easy FIGURE 5.3 Cost for export Cost for import Time for export Time for import More red tape in trading--less trade, larger bribes Export Import Region (US$ per container) (US$ per container) (days) (days) documents documents Rank Trade to GDP Corrup St. Petersburg 1,350 1,400 26 24 8 13 1 More Never Petrozavodsk 1,050 933 27 35 8 13 2 Rostov-on-Don 1,288 1,347 27 25 8 13 2 Tomsk 1,250 1,318 28 34 8 13 4 Tver 1,460 1,588 28 24 8 13 5 Irkutsk 1,225 1,450 31 35 8 13 6 Voronezh 1,660 1,660 28 23 8 13 7 Perm 1,600 1,600 31 25 Less 8 13 8 Common Kazan 1,550 1,650 24 27 8 Fewer 13 9More Moscow 2,150 2,150 36 36 Countries ranked by documents to export, quintiles 8 13 10 Countr Source: Doing Business database. Note: Relationships are signi cant at 5% level and remain signi cant when contro Source: Doing Business database; World Economic Forum, Global Competitiveness World Bank, World Development Indicators 2005. no bribes or tari s included Note: See Data notes for details. 18 DoINg BuSINESS IN RuSSIA 2009 toms, based on risk profiles--still above FIGURE 5.2 box 4 Top 5 reform features in trading Finland: fewer documents-- the international best practice of 5% to across borders faster procedures 10%. These inspections can take from 20 Reforms including feature since DB2006 (%) Documents for export (number) 4 minutes to 20 days. The regions acknowl- 45% Documents for imports (number) 5 edged that these inspection practices can Introduced or improved electronic be a problem, but reported only mild data interchange system Time for export (days) 8 Time for imports (days) 8 concern about it. 38% Doing Business measures the cost Improved customs administration Cost for exports (US$ per container) 495 of document preparation, customs and Cost to import (US$ per container) 575 35% technical control, port and terminal han- Introduced risk management techniques dling and inland transportation--for im- porting and exporting. Overall, trading 29% ments for export and 13 documents for costs in Russia are among the highest in Improved port procedures or infrastructure import in all the cities, document prepa- the world. Inland transportation is es- ration varies from 8 to 25 days in differ- pecially burdensome for many of the re- 14% Introduced border cooperation agreements ent cities measured in this study. gions of the Russian Federation given the The time to trade varies greatly be- vast size of the country. Delays in trans- Note: A reform may include several reform features. Source: Doing Business database. tween cities in Russia--from 23 days in portation affect the total time of trading Voronezh to 36 days in Moscow. Some across borders and are the main source of time differences stem from the region's variation in total costs among cities. The What to reform? FIGURE 5.3 geography. Although Russian ports work costs depend on the distance from the More red tape in trading--less trade, larger bribes 24 hours a day, their processing times port, quality of the roads and availability The number of economies implement- Trade to GDP Corruption in differ. St. Petersburg is the busiest port, of transportation. It costs over $700 to ing reforms to facilitate trade has been More Never moving 66% of Russia's sea-bound trade. transport a container by road from the increasing globally. In 2005 there were 25 Customs procedures and terminal han- nearest port Vladivostok to Tomsk or reformers on this indicator. In 2007/08 dling activities for export take 3 days in from St. Petersburg to Perm. there were 34. The most popular reform St. Petersburg. Minor delays in St. Peters- Many traders report that the rail feature in facilitating trade has been burg can be caused by waits in a terminal road fees for export-import goods may to implement an electronic data inter- or congestion in the inspection zone. The increase to as much as 3 times over fees change system (figure 5.2). waiting time for trucks to enter the port for the non-export goods. Consequently, Some trade reforms are expensive, Less Common can range from a few hours to 2 days. exporters are increasingly using private such as building roads or IT infrastruc- The major source of delays is the auto transport. Or, to avoid the high Fewer ture. But much can be done without More Fewer Countries ranked by documents to export, quintiles Countries ranke time needed to obtain the letter of credit. transportation costs, exporters register heavy spending. Clarifying rules and re- Note: Relationships are signi cant at 5% level and remain signi cant when controlling for in This reflects inefficiencies in the Rus- their goods as non-export for transpor- ducing Business database; World Economic Forum, Global Source: Doingpaperwork requirements is an Competitiveness Report 200 sian banking sector. The letter of credit tation purposes. Other trading costs are important start. World Bank, World Development Indicators 2005. accounts for over half of the export and similar across locations. Custom bro- import time. In addition, currency con- kers charge between 0.3% and 0.5% of reduce the number of import trol regulations still require the issuance a shipment value to process the import and export documents required of a "passport" for imports to ensure that or export requirements. Port and ter- Reducing document requirements is the hard currency earnings are repatriated minal handling fees average $150 for a first step in trade reforms. Countries that to Russia. The regulations also verify that 20-foot container and are similar across have efficient trade regulations--requir- transfers of hard-currency payments for ports. Competition among port opera- ing fewer documents, fewer signatures imports are for goods actually received tors dictates other terminal handling and less time for compliance--enjoy and properly valued. costs--such as unloading, transporting more trade. Requiring more documents The various inspections carried out a container to an inspection area, and has been shown to lead to more corrup- by customs, health and sanitary authori- emptying and filling the container for tion in customs (box 4). Faced with long ties are often merged into a single in- physical inspection. delays and frequent demands for bribes, spection. About 20% of the goods have many traders avoid customs altogether. to go through physical inspection at cus- Instead, they smuggle goods across the border. This defeats the very purpose of Note: A reform may include several reform features. Source: Doing Business database. TRADINg ACRoSS BoRDERS 19 FIGURE 5.3 . More red tape in trading--less trade, larger bribes Trade to GDP Corruption in imports More Never Less Common Fewer More Fewer More Countries ranked by documents to export, quintiles Countries ranked by signatures to import, quintiles Note: Relationships are signi cant at 5% level and remain signi cant when controlling for income per capita. Source: Doing Business database; World Economic Forum, Global Competitiveness Report 2004/2005; World Bank, World Development Indicators 2005. border control: the quality of smuggled cargo took an average of 10 days to clear goods cannot be ascertained and duties back in 2004, 70% of cargo is now cleared are not collected. in just an hour. Fewer inspections do not mean less revenue. In fact, Pakistan's expand use of a risk assessment customs revenue climbed 20% since in- policy for inspections and pre- spection limits were introduced. arrival release of Goods The pre-arrival release of goods is In Russia, over 20% of imports and ex- another effective trade reform. When ports undergo physical inspection. In documentary procedures for traded OECD countries, only 5% of imports goods are initiated before the goods ar- undergo inspection. The difference is rive, they can often be released imme- explained by the risk assessment policies diately and the overall clearance time is and their implementation. In the world's thereby reduced. At the same time, the most efficient risk assessment programs, cost of the imported goods is lowered, human intervention is minimal. Instead, which eventually benefits consumers. a computer program assesses the risk category of cargo against the profile of implement an account traders. This has allowed Mexico to limit manaGement service (ams) inspections to 10% of shipments, Thai- An Account Management Service (AMS) land to 15%. It has also increased the is a service provided to large import- detection of smuggled goods. ers who have no record of infractions Green lines and red lines are com- and are compliant with customs systems mon features of customs clearance in and procedures. Applying best risk-man- many countries--including Russia. Yet, agement practices, AMS can cut clear- in Russian cities, a large percentage of ance times without sacrificing regulatory cargo goes through red-channel proce- compliance. U.S. authorities pioneered dures--even if it belongs in the green the service in 1984. After implementing channel. Not so in Peru, where by law AMS in 2005 to 2007, Egypt reduced its only 15% of cargo is required to un- average customs clearance time from 2 dergo red-channel inspections. Pakistan month to just a few hours. also limited physical inspections to the riskiest consignments. These reforms re- duced Pakistan's inspections from 100% of cargo to less than 5% today. While 1. Djankov, Freund and Pham (forthcoming). Data notes eCOnOMY CHaraCteriStiCS GRoss nAtionAL inCome (Gni) peR CApitA Doing Business in Russia 2009 reports the 2007 income per capita and population as published in the World Bank's World Development Indicators 2008. Income is calculated using the Atlas method (current USD). For cost indicators expressed as percentage of income per capita, 2007 GNI in local currency units is used as the denominator. Russia's GNI per capita in 2007 = USD 7,560. eXChAnGe RAte The exchange rate used in this report is 1USD = 30.08 rubles ReGion AnD inCome GRoup Doing Business uses the World Bank regional and income groupings available at http://www. worldbank.org/data/countryclass/countryclass.html. The indicators presented and analyzed in the data often focus on a specific business capital requirements. Subsequently, local in- Doing Business in Russia 2009 measure gov- form--a limited liability company of a speci- corporation lawyers and government officials ernment regulation and the protections of fied size--and may not be representative of complete and verify the data. property rights ­ and their effect on busi- the regulation on other businesses, for exam- Information is also collected on the se- nesses, especially small and medium-size do- ple, sole proprietorships. Third, the measures quence in which procedures are to be com- mestic firms. The data for all sets of indicators of time involve an element of judgment by the pleted and whether procedures may be carried in Doing Business in Russia are for June 2008. expert respondents. Therefore, if sources in- out simultaneously. It is assumed that any In this project, Doing Business indicators have dicate different estimates, the time indicators required information is readily available and been created for 10 Russian cities--as shown reported in Doing Business represent the me- that all agencies involved in the start-up pro- in the tables on pages 28­30. dian values of several responses given under cess function without corruption. If answers Based on the study of laws and regula- the assumptions of the case study. Fourth, the by local experts differ, inquiries continue until tions with input and verification from over methodology assumes that the business has the data are reconciled. 200 government officials, businessmen, law- full information on what is required and does To make the data comparable across yers and other professionals routinely admin- not waste time in completing procedures. In countries, several assumptions about the busi- istering or advising on legal and regulatory re- practice, completing a procedure may take ness and the procedures are used. quirements. The Doing Business methodology longer if the business lacks information or is offers several advantages. First, it uses factual unable to follow up promptly. Assumptions About the business information about what laws and regulations Questions on the methodology and chal- The business: say and allows for multiple interactions with lenges to data may be submitted through the · Is a limited liability company. If there is local respondents to clarify potential misinter- "Ask a Question" function on the Doing Busi- more than one type of limited liability pretations of questions. Having representative ness website at http://ww.doingbusiness.org. company in the country, the limited samples of respondents is not an issue, as the Updated indicators, as well as any revisions of liability form most popular among texts of the relevant laws and regulations are or corrections to the printed data, are posted domestic firms is chosen. Information collected and answers checked for accuracy. in the website. on the most popular form is obtained from incorporation lawyers or the In addition, the methodology is inexpensive, statistical office. so data can be collected in a large sample · Operates in the economy's selected of economies--181 published in the global Starting a BuSineSS cities. report Doing Business 2009, 10 cities in Russia · Is 100% domestically owned and has 5 for this report. Because the same standard as- Doing Business records all procedures that are owners, none of whom is a legal entity. sumptions are applied in the data collection, officially required for an entrepreneur to start · Has start-up capital of 10 times income which are transparent and easily replicable, up and formally operate an industrial or com- per capita at the end of 2006, paid in comparisons and benchmarks are valid across mercial business. These include obtaining all cash. countries and states. And the data not only necessary licenses and permits and complet- · Performs general industrial or commer- highlight the extent of obstacles but also help ing any required notifications, verifications or cial activities, such as the production identify their sources, which can help policy- inscriptions for the company and employees or sale of products or services to the makers to design reforms. with relevant authorities. public. The business does not perform The Doing Business methodology has 4 After a study of laws, regulations and foreign trade activities and does not limitations that should be considered when publicly available information on business handle products subject to a special tax interpreting the data. First, the collected data entry, a detailed list of procedures is de- regime, for example, liquor or tobacco. refer to businesses in the selected location veloped, along with the time and cost of It is not using heavily polluting produc- and may not be representative of regulatory complying with each procedure under nor- tion processes. practices in other parts of the country. Second, mal circumstances and the paid-in minimum data notes 21 · Leases the commercial plant and offices time mum capital recorded for Germany is there- and is not a proprietor of real estate. Time is recorded in calendar days. The mea- fore 12,500, or 42.8% of income per capita. · Does not qualify for investment incen- sure captures the median duration that incor- In Serbia the minimum capital requirement tives or any special benefits. poration lawyers indicate is necessary to com- was 500, of which only half needed to be paid · Has at least 10 and up to 50 employees plete a procedure with minimum follow-up before registration. The paid-in minimum 1 month after the commencement of with government agencies and no extra pay- capital recorded for Serbia is therefore 250, operations, all of them nationals. ments. It is assumed that the minimum time or 8% of income per capita. · Has a turnover of at least 100 times required for each procedure is 1 day. Although income per capita. procedures may take place simultaneously, This methodology was developed in Djankov · Has a company deed 10 pages long. they cannot start on the same day (that is, and others (2002) and is adopted here with simultaneous procedures start on consecutive minor changes. pRoCeDuRes days). A procedure is considered completed A procedure is defined as any interaction of once the company has received the final docu- the company founder with external parties ment, such as the company registration cer- Dealing witH COnStruCtiOn (for example, government agencies, lawyers, tificate or tax number. If a procedure can be PerMitS auditors or notaries). Interactions between accelerated for an additional cost, the fastest company founders or company officers and procedure is chosen. It is assumed that the employees are not counted as procedures. entrepreneur does not waste time and com- Doing Business records all procedures required Procedures that must be completed in the mits to completing each remaining procedure for a business in the construction industry to same building but in different offices are without delay. The time that the entrepreneur build a standardized warehouse. These proce- counted as separate procedures. If founders spends on gathering information is ignored. It dures include submitting all relevant project- have to visit the same office several times is assumed that the entrepreneur is aware of specific documents (for example, building for different sequential procedures, each is all entry regulations and their sequence from plans and site maps) to the authorities; obtain- counted separately. The founders are assumed the beginning but has had no prior contact ing all necessary clearances, licenses, permits to complete all procedures themselves, with- with any of the officials. and certificates; completing all required noti- out middlemen, facilitators, accountants or fications; and receiving all necessary inspec- lawyers, unless the use of such a third party Cost tions. Doing Business also records procedures is mandated by law. If the services of profes- Cost is recorded as a percentage of the coun- for obtaining all utility connections. Proce- sionals are required, procedures conducted by try's income per capita. It includes all official dures necessary to register the property so such professionals on behalf of the company fees and fees for legal or professional services that it can be used as collateral or transferred are counted separately. if such services are required by law. Fees for are also counted. The survey divides the pro- Both pre- and postincorporation pro- purchasing and legalizing company books are cess of building a warehouse into distinct cedures that are officially required for an included if these transactions are required by procedures and calculates the time and cost of entrepreneur to formally operate a business law. The company law, the commercial code completing each procedure in practice under are recorded. and specific regulations and fee schedules are normal circumstances. Procedures required for official corre- used as sources for calculating costs. In the Information is collected from experts in spondence or transactions with public agen- absence of fee schedules, a government of- construction licensing, including architects, cies are also included. For example, if a com- ficer's estimate is taken as an official source. In construction lawyers, construction firms, util- pany seal or stamp is required on official the absence of a government officer's estimate, ity service providers and public officials who documents, such as tax declarations, obtain- estimates of incorporation lawyers are used. deal with building regulations, including ap- ing the seal or stamp is counted. Similarly, if If several incorporation lawyers provide dif- provals and inspections. To make the data a company must open a bank account before ferent estimates, the median reported value is comparable across countries, several assump- registering for sales tax or value added tax, applied. In all cases the cost excludes bribes. tions about the business, the warehouse proj- this transaction is included as a procedure. ect and the procedures are used. Shortcuts are counted only if they fulfill 4 pAiD-in minimum CApitAL criteria: they are legal, they are available to the The paid-in minimum capital requirement re- Assumptions About the ConstRuCtion CompAny general public, they are used by the major- flects the amount that the entrepreneur needs ity of companies, and avoiding them causes to deposit in a bank before registration and up The business (BuildCo): substantial delays. to 3 months following incorporation and is re- · Is a limited liability company. Only procedures required of all busi- corded as a percentage of the country's income · Operates in the economy's selected nesses are covered. Industry-specific proce- per capita. The amount is typically specified cities. dures are excluded. For example, procedures in the commercial code or the company law. · Is 100% domestically and privately to comply with environmental regulations Many countries have a minimum capital re- owned. are included only when they apply to all quirement but allow businesses to pay only · Has 5 owners, none of whom is a legal businesses conducting general commercial a part of it before registration, with the rest entity. or industrial activities. Procedures that the to be paid after the first year of operation. In · Is fully licensed and insured to carry company undergoes to connect to electricity, Germany in June 2007 the minimum capital out construction projects, such as water, gas and waste disposal services are not requirement for limited liability companies building warehouses. included. was 25,000, of which at least 12,500 was · Has 60 builders and other employees, payable before registration. The paid-in mini- all of them nationals with the technical 22 doing Business in russia 2009 expertise and professional experi- pRoCeDuRes regiStering PrOPertY ence necessary to obtain construction A procedure is any interaction of the compa- permits and approvals. ny's employees or managers with external par- Doing Business records the full sequence of · Has at least 1 employee who is a li- ties, including government agencies, notaries, procedures necessary when a business pur- censed architect and registered with the the land registry, the cadastre, utility com- chases land and a building to transfer the local association of architects. panies, public and private inspectors and tech- property title from another business so that · Has paid all taxes and taken out all nical experts apart from in-house architects the buyer can use the property for expanding necessary insurance applicable to its and engineers. Interactions between company its business, as collateral in taking new loans general business activity (for example, employees, such as development of the ware- or, if necessary, to sell to another business. accidental insurance for construction workers and third-person liability house plans and inspections conducted by Every procedure required by law or neces- insurance). employees, are not counted as procedures. sary in practice is included, whether it is the · Owns the land on which the warehouse Procedures that the company undergoes to responsibility of the seller or the buyer or must is built. connect to electricity, water, sewerage and be completed by a third party on their behalf. phone services are included. All procedures Local property lawyers, notaries and property Assumptions About the wARe- that are legally or in practice required for registries provide information on procedures house pRojeCt building a warehouse are counted, even if they as well as the time and cost to complete each The warehouse: may be avoided in exceptional cases. of them. · Has 2 stories, both above ground, with To make the data comparable across a total surface of approximately 14,000 time countries, several assumptions about the par- square feet (1,300.6 square meters). Time is recorded in calendar days. The mea- ties to the transaction, the property and the Each floor is 9 feet, 10 inches (3 meters) sure captures the median duration that local procedures are used. high. experts indicate is necessary to complete a · Has road access and is located in the procedure in practice. It is assumed that the Assumptions About the pARties periurban area of the country's most minimum time required for each procedure is The parties (buyer and seller): populous city (that is, is on the fringes 1 day. If a procedure can be accelerated legally · Are limited liability companies. of the city but still within its official for an additional cost, the fastest procedure is · Are located in the periurban area of the limits). It is not located in a special economic or industrial zone. chosen. It is assumed that BuildCo does not economy's selected cities. waste time and commits to completing each · Are 100% domestically and privately · Is located on a land plot of 10,000 square feet (929 square meters) that is remaining procedure without delay. The time owned. 100% owned by BuildCo and is regis- that BuildCo spends on gathering informa- · Have 50 employees each, all of whom tered in the cadastre and land registry. tion is ignored. It is assumed that BuildCo is are nationals. · Is a new construction (there was no aware of all building requirements and their · Perform general commercial activities. previous construction on the land). sequence from the beginning. Assumptions About the pRopeRty · Has complete architectural and Cost technical plans prepared by a licensed The property: architect. Cost is recorded as a percentage of the coun- · Has a value of 50 times income per · Will be connected to the following try's income per capita. Only official costs capita. The sale price equals the value. utilities--electricity, water, sewerage are recorded. All the fees associated with · Is fully owned by the seller. (sewage system, septic tank or their completing the procedures to legally build · Has no mortgages attached and has equivalent) and one land phone line. a warehouse are recorded, including those been under the same ownership for the The connection to each utility network associated with obtaining land use approv- past 10 years. will be 32 feet, 10 inches (10 meters) als and preconstruction design clearances; · Is registered in the land registry or long. receiving inspections before, during and after cadastre, or both, and is free of title · Will require a 10-ampere power con- construction; getting utility connections; and disputes. nection and 140 kilowatts of electricity. registering the warehouse property. Nonre- · Is located in a periurban commercial · Will require up to 100 cubic meters of curring taxes required for the completion of zone, and no rezoning is required. water daily. the warehouse project also are recorded. The · Consists of land and a building. The · Will be used for general storage building code, information from local experts land area is 6,000 square feet (557.4 activities, such as storage of books or and specific regulations and fee schedules are square meters). A 2-story warehouse of stationery. The warehouse will not be 10,000 square feet (929 square meters) used as sources for costs. If several local part- used for any goods requiring special is located on the land. The warehouse conditions, such as food, chemicals or ners provide different estimates, the median is 10 years old, is in good condition pharmaceuticals. reported value is used. and complies with all safety standards, · Will include all technical equipment building codes and other legal require- required to make the warehouse fully ments. The property of land and build- operational. ing will be transferred in its entirety. · Will take 30 weeks to construct (exclud- · Will not be subject to renovations ing all delays due to administrative and or additional building following the regulatory requirements). purchase. data notes 23 · Has no trees, natural water sources, tal gains tax or value added tax, are excluded DoCuments natural reserves or historical monu- from the cost measure. Both costs borne by All documents required to export and import ments of any kind. the buyer and those borne by the seller are in- the goods are recorded. It is assumed that the · Will not be used for special purposes, cluded. If cost estimates differ among sources, contract has already been agreed upon and and no special permits, such as for the median reported value is used. signed by both parties. Documents include residential use, industrial plants, waste bank documents, customs declaration and storage or certain types of agricultural clearance documents, port filing documents, activities, are required. traDing aCrOSS BOrDerS import licenses and other official documents · Has no occupants (legal or illegal), and exchanged between the concerned parties. no other party holds a legal interest in it. Doing Business compiles procedural require- Documents filed simultaneously are consid- ments for exporting and importing a stan- ered different documents but with the same pRoCeDuRes dardized cargo of goods by ocean transport. time frame for completion. A procedure is defined as any interaction Every official procedure for exporting and of the buyer or the seller, their agents (if an importing the goods is recorded--from the time agent is legally or in practice required) or contractual agreement between the 2 parties to Time is recorded in calendar days. The time the property with external parties, includ- the delivery of goods--along with the time and calculation for a procedure starts from the ing government agencies, inspectors, notaries cost necessary for completion. All documents moment it is initiated and runs until it is com- and lawyers. Interactions between company required for clearance of the goods across the pleted. If a procedure can be accelerated for officers and employees are not considered. border are also recorded. For exporting goods, an additional cost, the fastest legal procedure All procedures that are legally or in practice procedures range from packing the goods at is chosen. It is assumed that neither the ex- required for registering property are recorded, the factory to their departure from the port of porter nor the importer wastes time and that even if they may be avoided in exceptional exit. For importing goods, procedures range each commits to completing each remain- cases. It is assumed that the buyer follows the from the vessel's arrival at the port of entry to ing procedure without delay. Procedures that fastest legal option available and used by the the cargo's delivery at the factory warehouse. can be completed in parallel are measured majority of property owners. Although the Payment is made by letter of credit. as simultaneous. The waiting time between buyer may use lawyers or other professionals Local freight forwarders, shipping lines, procedures--for example, during unloading where necessary in the registration process, it customs brokers and port officials provide in- of the cargo--is included in the measure. is assumed that it does not employ an outside formation on required documents and cost as facilitator in the registration process unless well as the time to complete each procedure. Cost legally or in practice required to do so. Inland transport costs are based on number Cost measures the fees levied on a 20-foot of kilometers. The time to obtain a letter of container in U.S. dollars. All the fees associ- time credit refers to a first time application and ated with completing the procedures to ex- Time is recorded in calendar days. The mea- any documentation between the shipper and port or import the goods are included. These sure captures the median duration that prop- trader is excluded. include costs for documents, administrative erty lawyers, notaries or registry officials indi- fees for customs clearance and technical con- cate is necessary to complete a procedure. It is Assumptions About the business trol, terminal handling charges and inland assumed that the minimum time required for The business: transport. The cost measure does not include each procedure is 1 day. Although procedures · Has 60 or more employees. tariffs or trade taxes. Only official costs are may take place simultaneously, they cannot · Is located in the economy's selected cities. recorded. start on the same day. It is assumed that the · Is a private, limited liability company. It buyer does not waste time and commits to does not operate within an export pro- This methodology was developed by Djankov, completing each remaining procedure with- cessing zone or an industrial estate with Freund and Pham (2008) and is adopted here out delay. If a procedure can be accelerated for special export or import privileges. with minor changes. an additional cost, the fastest legal procedure · Is domestically owned with no foreign available and used by the majority of property ownership. owners is chosen. If procedures can be under- · Exports more than 10% of its sales. taken simultaneously, it is assumed that they are. It is assumed that the parties involved are Assumptions About the tRADeD GooDs aware of all regulations and their sequence from the beginning. Time spent on gathering · The traded product travels in a dry- cargo, 20-foot, full container load. The information is not considered. product: Cost · Is not hazardous nor does it include military items. Cost is recorded as a percentage of the prop- · Does not require refrigeration or any erty value, assumed to be equivalent to 50 other special environment. times income per capita. Only official costs · Does not require any special phytosani- required by law are recorded, including fees, tary or environmental safety standards transfer taxes, stamp duties and any other pay- other than accepted international ment to the property registry, notaries, public standards. agencies or lawyers. Other taxes, such as capi- Doing business indicators 26 doing Business in russia 2009 Starting a business Dealing with construction permits Ease of Ease of dealing with Cost starting a Cost construction Procedures Time (% of income business Procedures Time (% of income permits (number) (days) per capita) (rank) (number) (days) per capita) (rank) Irkutsk 13 23 1.9 3 26 304 487.4 3 Kazan 10 34 1.3 2 23 350 396.1 2 Moscow 9 30 2.7 8 54 704 2,612.8 10 Perm 10 36 2.2 10 24 263 1,060.2 3 Petrozavodsk 10 37 2.1 6 28 365 270.3 3 Rostov-on-Don 13 22 1.6 1 22 194 272.9 1 Saint-Petersburg 11 29 2.2 9 29 299 2,116.2 8 Tomsk 13 24 2.2 7 44 233 502.1 6 Tver 10 27 2.1 3 26 390 826.9 7 Voronezh 14 24 1.8 5 48 1,207 399.1 9 indicator taBLes 27 Registering property Trading across borders Cost Ease of Cost to (% of registering Documents Time for export Documents Time for Cost to Ease of Procedures Time property property for export export (US$ per for import import import (US$ trading (number) (days) value) (rank) (number) (days) container) (number) (days) per container) (rank) Irkutsk 6 51 0.24 8 8 31 1,225 13 35 1,450 6 Kazan 5 80 0.15 2 8 24 1,550 13 27 1,650 9 Moscow 6 52 0.2 7 8 36 2,150 13 36 2,150 10 Perm 6 51 0.2 3 8 31 1,600 13 25 1,600 8 Petrozavodsk 7 52 0.18 3 8 27 1,050 13 35 933 2 Rostov-on-Don 5 61 0.35 10 8 27 1,288 13 25 1,347 2 Saint-Petersburg 6 117 0.17 6 8 26 1,350 13 24 1,400 1 Tomsk 6 47 0.24 5 8 28 1,250 13 34 1,318 4 Tver 6 48 0.16 1 8 28 1,460 13 24 1,588 5 Voronezh 5 56 0.27 9 8 28 1,660 13 23 1,660 7 28 doing Business in russia 2009 irkutsk Irkutsk Oblast Ease of doing business (rank) 6 Starting a business (rank) 3 Registering property (rank) 8 Procedures (number) 13 Procedures (number) 6 Time (days) 23 Time (days) 51 Cost (% of income per capita) 1.9 Cost (% of property value) 0.24 Dealing with construction permits (rank) 3 Trading across borders (rank) 6 Procedures (number) 26 Documents to export (number) 8 Time (days) 304 Time to export (days) 31 Cost (% of income per capita) 487.4 Cost to export (US$ per container) 1,225 Documents to import (number) 13 Time to import (days) 35 Cost to import (US$ per container) 1,450 Kazan Republic of Tatarstan Ease of doing business (rank) 1 Starting a business (rank) 2 Registering property (rank) 2 Procedures (number) 10 Procedures (number) 5 Time (days) 34 Time (days) 80 Cost (% of income per capita) 1.3 Cost (% of property value) 0.15 Dealing with construction permits (rank) 2 Trading across borders (rank) 9 Procedures (number) 23 Documents to export (number) 8 Time (days) 350 Time to export (days) 24 Cost (% of income per capita) 396.1 Cost to export (US$ per container) 1,550 Documents to import (number) 13 Time to import (days) 27 Cost to import (US$ per container) 1,650 moscow Ease of doing business (rank) 10 Starting a business (rank) 8 Registering property (rank) 7 Procedures (number) 9 Procedures (number) 6 Time (days) 30 Time (days) 52 Cost (% of income per capita) 2.7 Cost (% of property value) 0.2 Dealing with construction permits (rank) 10 Trading across borders (rank) 10 Procedures (number) 54 Documents to export (number) 8 Time (days) 704 Time to export (days) 36 Cost (% of income per capita) 2,612.8 Cost to export (US$ per container) 2,150 Documents to import (number) 13 Time to import (days) 36 Cost to import (US$ per container) 2,150 perm Perm Krai Ease of doing business (rank) 7 Starting a business (rank) 10 Registering property (rank) 3 Procedures (number) 10 Procedures (number) 6 Time (days) 36 Time (days) 51 Cost (% of income per capita) 2.2 Cost (% of property value) 0.2 Dealing with construction permits (rank) 3 Trading across borders (rank) 8 Procedures (number) 24 Documents to export (number) 8 Time (days) 263 Time to export (days) 31 Cost (% of income per capita) 1,060.2 Cost to export (US$ per container) 1,600 Documents to import (number) 13 Time to import (days) 25 Cost to import (US$ per container) 1,600 cit Y taBLes 29 petrozavodsk Republic of Karelia Ease of doing business (rank) 3 Starting a business (rank) 6 Registering property (rank) 3 Procedures (number) 10 Procedures (number) 7 Time (days) 37 Time (days) 52 Cost (% of income per capita) 2.1 Cost (% of property value) 0.18 Dealing with construction permits (rank) 3 Trading across borders (rank) 2 Procedures (number) 28 Documents to export (number) 8 Time (days) 365 Time to export (days) 27 Cost (% of income per capita) 270.3 Cost to export (US$ per container) 1,050 Documents to import (number) 13 Time to import (days) 35 Cost to import (US$ per container) 933 Rostov-on-Don Rostov Oblast Ease of doing business (rank) 4 Starting a business (rank) 1 Registering property (rank) 10 Procedures (number) 13 Procedures (number) 5 Time (days) 22 Time (days) 61 Cost (% of income per capita) 1.6 Cost (% of property value) 0.35 Dealing with construction permits (rank) 1 Trading across borders (rank) 2 Procedures (number) 22 Documents to export (number) 8 Time (days) 194 Time to export (days) 27 Cost (% of income per capita) 272.9 Cost to export (US$ per container) 1,288 Documents to import (number) 13 Time to import (days) 25 Cost to import (US$ per container) 1,347 st. petersburg Ease of doing business (rank) 8 Starting a business (rank) 9 Registering property (rank) 6 Procedures (number) 11 Procedures (number) 6 Time (days) 29 Time (days) 117 Cost (% of income per capita) 2.2 Cost (% of property value) 0.17 Dealing with construction permits (rank) 8 Trading across borders (rank) 1 Procedures (number) 29 Documents to export (number) 8 Time (days) 299 Time to export (days) 26 Cost (% of income per capita) 2,116.2 Cost to export (US$ per container) 1,350 Documents to import (number) 13 Time to import (days) 24 Cost to import (US$ per container) 1,400 tomsk Tomsk Oblast Ease of doing business (rank) 5 Starting a business (rank) 7 Registering property (rank) 5 Procedures (number) 13 Procedures (number) 6 Time (days) 24 Time (days) 47 Cost (% of income per capita) 2.2 Cost (% of property value) 0.24 Dealing with construction permits (rank) 6 Trading across borders (rank) 4 Procedures (number) 44 Documents to export (number) 8 Time (days) 233 Time to export (days) 28 Cost (% of income per capita) 502.1 Cost to export (US$ per container) 1,250 Documents to import (number) 13 Time to import (days) 34 Cost to import (US$ per container) 1,318 30 doing Business in russia 2009 tver Tver Oblast Ease of doing business (rank) 2 Starting a business (rank) 3 Registering property (rank) 1 Procedures (number) 10 Procedures (number) 6 Time (days) 27 Time (days) 48 Cost (% of income per capita) 2.1 Cost (% of property value) 0.16 Dealing with construction permits (rank) 7 Trading across borders (rank) 5 Procedures (number) 26 Documents to export (number) 8 Time (days) 390 Time to export (days) 28 Cost (% of income per capita) 826.9 Cost to export (US$ per container) 1,460 Documents to import (number) 13 Time to import (days) 24 Cost to import (US$ per container) 1,588 Voronezh Voronezh Oblast Ease of doing business (rank) 9 Starting a business (rank) 5 Registering property (rank) 9 Procedures (number) 14 Procedures (number) 5 Time (days) 24 Time (days) 56 Cost (% of income per capita) 1.8 Cost (% of property value) 0.27 Dealing with construction permits (rank) 9 Trading across borders (rank) 7 Procedures (number) 48 Documents to export (number) 8 Time (days) 1,207 Time to export (days) 28 Cost (% of income per capita) 399.1 Cost to export (US$ per container) 1,660 Documents to import (number) 13 Time to import (days) 23 Cost to import (US$ per container) 1,660 Cost to import (US$ per container) 1,660 List of procedures 32 Doing Business in russia 2009 Starting a business Legal form: Private Limited Liability Company (LLC) Minimum capital requirement: 10,000 rubles fully paid in during the first year of operations; 50% (5,000 rubles) should be paid in before the state registration Parallel procedures: 1-2-3, 5-6-7-8-9, 12-13 Agency or Organization Time to complete Cost to complete Generalized procedure involved (working days) (rubles)1 Comments 1 Deposit charter capital ­ opening of Bank, at own choice 1-2 5,000 50% at registration, minimum capital temporary bank account requirement 10,000 rubles 2 Payment of the state registration fee for the Bank, at own choice 1 - State fee is paid in bank state registration of a new company (a legal [see #4] entity) 3 Notarization of signature on an application Notary, at own choice 1 200 form for the state registration 4 State registration of an LLC ­ register in the Tax inspection ­ usually a 5 2,000 Procedures 4-7 can be completed within a Unified State Registry of Legal Entities and district one one-stop shop assignment of the Taxpayer's Identification Number 5 Registration with the Social Security Fund Social Security Fund 1-2 0 6 Registration with the Pension Fund Pension Fund 1-2 0 7 Registration with the Mandatory Medical Mandatory Medical 1-2 0 Insurance Fund Insurance Fund 8 Production of a company's seal Seal producer, at own choice 1-2 150 - 900 A company seal is mandatory to open a bank account 9 Registration with the Federal State Statistics Federal State Statistic Service 1-2 0 An information letter is mandatory to open a Service and receipt of an information letter (Rosstat) bank account 10 Notarization of statutory documents to Notary, at own choice 1 About 1,220 Usually: open a bank account and notarization of Signatures on bank card: 200 rubles each signatures on a bank card signature Statutory documents: 500 rubles for a charter and for a founding agreement each, despite the number of pages, or 10-20 rubles for 1 page State registration certificate: 10 rubles Taxpayer registration certificate: 10 rubles Bank can also notarize all necessary documents, eliminating the need for a notary office. The choice is either the client's or the bank's. 11 Opening of a bank account Bank at own choice 1-3 0 ­ 3,500 12 Notification of the Federal Tax Service about Can be mailed 1 0 or post expense Standard form is used a bank account number 13 Registration with an employment center Employment Center 1 0 Not in all cities and/or issuance of labor books for employees 1. notaries (to a certain extent), banks and company seal producers are private enterprises and set up prices themselves. proceDures 33 Procedures required to start a business, by city Time (days), cost (rubles) Rostov- St. Irkutsk Kazan Moscow Perm Petrozavodsk Tomsk Tver Voronezh on-Don Petersburg Notarize signatures Time 1 1 on foundation documents Cost 2,600 600 Deposit capital Time 3 2 1 1 2 1 3 2 2 1 Cost 0 0 0 0 0 0 0 0 0 0 Pay registration fee Time 1 1 1 1 1 1 1 1 1 1 Cost 0 0 0 0 0 0 0 0 0 0 Notarize applicant's signature Time 1 1 1 1 1 1 1 1 1 Cost 200 200 250 200 200 200 1,000 200 200 Register with the State Tax Time 8 18 18 22 21 8 14 8 11 8 Inspectorate Cost 2,000 2,000 2,000 2,000 2,000 2,400 2,000 2,000 2,000 2,000 Obtain Taxpayer's Time 1 Identification Number Cost 0 Check of the legal address by the Time 1 registration office (Kazan only) Cost 0 Register with the Time 1 1 1 1 Social Security Fund Cost 0 0 0 0 Register with Time 1 1 1 1 the Pension Fund Cost 0 0 0 0 Register with the Mandatory Time 1 1 1 1 Medical Insurance Fund Cost 0 0 0 0 Order a company's seal Time 1 1 1 1 1 2 1 2 2 1 Cost 600 400 400 700 800 525 400 575 350 290 Register with the Federal Time 2 3 1 1 2 1 1 5 1 State Statistics Service Cost 0 0 0 0 0 0 0 360 0 Notarize the statutory documents, Time 1 1 1 1 1 1 1 1 1 state registration and Taxpayer Cost 1,420 1,200 1,560 500 420 1,200 1,020 1,060 1,060 Identification Number certificate; notarize signatures on bankcard Open the company bank account Time 3 3 1 3 2 1 3 3 1 1 Cost 0 400 0 600 1200 0 500 400 900 600 Inform the State Tax Inspectorate Time 1 4 5 4 7 1 4 1 4 4 of the bank account number Cost 0 0 0 0 0 0 0 0 0 0 Register with an employment Time 1 1 1 1 1 1 1 1 1 1 center and/or obtain labor books Cost 0 0 0 0 0 0 0 0 0 0 for employees source: Doing Business database. 34 Doing Business in russia 2009 Dealing with construction permits: building a warehouse Time (days), cost (rubles) Rostov St. Irkutsk Kazan Moscow Perm Petrozavodsk Tomsk Tver Voronezh -on-Don Petersburg Pre-construction procedures Submit application to obtain Time 1 1 25 15 Act of Permission for Use/ Cost 0 0 0 0 Consultation w/ local architect Land Survey/Situation Plan Time 30 30 15 14 15 35 10 14 15 15 conclusion Cost 5,000 15,000 43,680 5,000 5,100 25,000 10,000 20,000 20,000 10,000 Conclusion of Territorial Union Time 15 1 25 of Land Use Regulation Cost 4,330 20,000 1,000 Decision by District Land Time 30 30 1 10 Commission with Architecture Cost 0 0 0 0 Planning Department/sketch Request and obtain clearance Time 7 of draft disposition of Prefect Cost 0 with the Architecture Planning Department (APD) Clearance of draft Disposition Time 7 14 of Prefect/city district head Cost 0 0 Clearance of draft Disposition Time 7 90 with Territory union of land Cost 0 9,000 use regulation Location/Land Use Permit/ Time 7 7 45 75 Ecological conclusion Cost 0 0 10,000 0 Zoning Permit--Conclusion on Time 44 152 25 compliance from the District/no Cost 0 4,500 0 arrears Technical conditions for water Time 21 21 45 21 14 19 30 10 15 30 and sewage connections * Cost 0 17,673 0 0 0 0 0 0 5,000 Project approval for water Time 3 15 and sewage * Cost 0 0 Approval of distribution Time 1 14 2 company for new object Cost 0 0 0 to access electricity service * Technical conditions Time 30 21 30 21 14 13 30 14 14 14 for electricity connection * Cost 0 0 0 0 0 0 32,327 0 0 0 Project copy scale 1:500 from Time 21 7 electric distribution company * Cost 0 0 Approved drawings from Time 10 10 electricity supply company * Cost 1,200 0 Approval from Russian Technical Time 7 10 2 1 Supervision (Rostechnadzor) * Cost 0 0 0 2,500 Approval from city illumination Time 10 5 Gorsvet* Cost 0 0 Technical conditions Time 14 21 30 21 14 14 28 7 13 30 for telephone connection * Cost 7,600 0 0 0 0 0 4,000 3,000 0 0 Time 30 30 14 35 14 20 60 35 35 30 Geological engineering survey * Cost 10,000 75,000 4,500 250,000 5,500 10,000 56,000 525,000 28,000 15,000 Request and obtain Act of Time 30 24 30 21 30 30 45 15 20 300 Permission for Use / GPZU/ APZ Cost 50,000 0 6,700 11,500 15,000 0 0 0 0 0 Inception of Construction Time 60 14 Designing (Decision on Cost 0 10,000 Construction) Approval of requirements Time 7 1 under consumer protection Cost 53,000 0 Approval of conditions Time 14 60 for designs by APU Cost 12,100 0 Approval of conditions for designs Time 14 7 by Prefecture / local government Cost 0 6,000 proceDures 35 Dealing with construction permits: building a warehouse (continued) Time (days), cost (rubles) Rostov St. Irkutsk Kazan Moscow Perm Petrozavodsk Tomsk Tver Voronezh -on-Don Petersburg Pre-construction procedures (continued) Approval of conditions for Time 7 365 designs by local government Cost 0 N/A Technical conditions for fire Time 21 14 21 8 7 10 14 15 prevention * Cost 0 14,728 0 1,500 0 0 0 0 Approval of conditions for Time 14 technical examinations of Cost 7,364 designs (Expertiza) * Time 15 15 Land survey approval* Cost 36,700 3,900 Conditions for designs Time 21 30 21 7 14 1 30 14 with Sanitary Services Cost 0 13,800 0 300 15,612 0 3,000 0 (Rospotrebnadzor) * Receive inspection from Time 1 1 Rospotrenadzor Cost 0 2,500 Time 28 1 Approval of Rospotrebnadzor Cost 0 0 Transport routes, parking from Time 21 30 21 1 30 City Transport Agency * Cost 0 8,837 0 0 0 State Inspection of Road Safety Time 21 30 21 7 2 (GIBBD) * Cost 0 8,837 0 0 0 Department of Comprehensive Time 21 30 21 14 14 Well-Being of City* Cost 0 4,600 0 0 0 Department of Nature Use Time 21 21 21 45 5 under State Ecological Cost 0 29,455 0 30,000 0 Expertise* Sketch No. 2 from City Time 30 30 Geological Institute Cost 10,100 50,000 Sketch No. 2 with city Time 30 60 Architecture Committee Cost 4,000 0 Construction passport from City Time 30 Geological Unit Cost 8,837 Outline of Construction Time 30 14 Arrangement and "GenPlan" Cost 6,500 0 from APU * Outline of Construction Time 30 30 Arrangement and "GenPlan" Cost 0 0 from Prefecture * Outline of Construction Time 1 30 Arrangement and "GenPlan" Cost 0 12,200 from GenPlan Institute * Certificate of approval Time 60 30 30 30 1 30 of the design Cost 0 0 3,600 0 0 0 Approval of project by the State Time 60 Expertise (Third Party Review) Cost 58,000 Time 60 14 10 45 120 14 30 10 30 25 Construction permit Cost 0 0 11,460 0 0 0 0 0 0 0 Notify about commencement of Time 9 7 7 1 7 7 construction works Cost 0 0 0 0 0 0 * Takes place simultaneously with another procedure. 36 Doing Business in russia 2009 Dealing with construction permits: building a warehouse (continued) Time (days), cost (rubles) Rostov St. Irkutsk Kazan Moscow Perm Petrozavodsk Tomsk Tver Voronezh -on-Don Petersburg Procedures during construction Inspection during foundation Time 1 1 1 works Cost 0 0 0 Inspection during Time 1 1 1 1 structure works Cost 0 0 0 0 Inspection during Time 14 1 engineering works Cost 15,000 0 Inspection by Union of Time 1 1 Administrative Technical Cost 0 0 Inspection (UATI) - I Inspection by Union of Time 1 1 Administrative Technical Cost 0 0 Inspection (UATI) - II Inspection by Union of Time 1 1 Administrative Technical Cost 0 0 Inspection (UATI) - III Inspection by Union of Time 1 1 Administrative Technical Cost 0 0 Inspection (UATI) - IV Inspection by Union of Time 1 Administrative Technical Cost 0 Inspection (UATI) - V Inspection by Union of Time 1 Administrative Technical Cost 0 Inspection (UATI) - VI Inspection by Union of Time 1 Administrative Technical Cost 0 Inspection (UATI) -VII Utility connection Request water and sewage Time 1 1 1 7 2 1 1 connection Cost 0 0 0 0 2,000 0 0 Receive inspection from Time 1 1 1 10 1 14 municipal enterprise on water Cost 0 0 0 0 0 0 and sewage maintenance/ approval Sign agreement on water and Time 9 1 sewage supply Cost 0 0 Permit for connecting to Time 14 1 30 2 engineer -technical mains Cost 0 0 5,000 0 Approval for drinking water Time 14 1 28 3 from Sanitary Services Cost 0 0 1 0 Time 13 29 30 7 60 28 21 1 30 29 Connect to water services * Cost 26,000 200,000 0 0 1,500 13,000 0 200,000 5,000 200,000 Receive inspection from Time 1 1 1 2 electricity distribution company Cost 0 0 0 0 Request and receive inspection Time 3 1 1 1 1 1 2 10 30 2 from Energy Supervision * Cost 0 0 0 0 0 0 0 0 0 0 Connect to electricity ­sign Time 3 7 14 21 60 29 2 1 30 30 agreement with electricity Cost 910,000 1,226,008 5,490,520 2,107,980 559,666 479,416 4,628,400 273,260 1,750,000 492,000 distribution company* Receive inspection from Time 1 2 telephone company Cost 0 0 Request and connect to Time 2 10 5 14 45 30 28 14 10 10 telephone services* Cost 10,620 48,000 3,000 10,000 500 10,000 4,000 3,000 1,000 48,000 * Takes place simultaneously with another procedure. proceDures 37 Dealing with construction permits: building a warehouse (continued) Time (days), cost (rubles) Rostov St. Irkutsk Kazan Moscow Perm Petrozavodsk Tomsk Tver Voronezh -on-Don Petersburg Post-construction Certificate of Department of Time 1 1 Architecture, City Plan Cost 0 0 Request and convene Time 30 30 1 60 11 20 3 Acceptance Commission Cost 0 0 0 10,000 0 0 0 Request inspection from Time 1 1 Sanitary Services for Occupancy Cost 0 0 Permit Receive inspection from Time 14 1 Sanitary Service and obtain Cost 0 3,500 approval Request inspection from Fire Time 1 1 Department for Occupancy Cost 0 0 Permit Receive inspection from Time 14 2 Fire Department and obtain Cost 0 0 approval Approval of topographic survey Time 16 w/ utility connections Cost 15,000 Time 1 15 10 28 30 10 15 10 10 15 Occupancy permit Cost 0 0 0 0 0 0 0 0 0 0 Plans from Bureau of Technical Time 3 3 30 30 30 7 1 3 30 1 Inventory (BTI) Cost 66,606 30,000 55,000 15,000 8,000 60,000 60,000 65,000 30,000 60,000 Register the building after Time 30 30 30 30 30 30 30 30 30 30 completion Cost 7,500 6,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 source: Doing Business database. 38 Doing Business in russia 2009 Registering property Property value: 11,370,240 rubles Parallel procedures: 1-5 Agency or organization Time to complete Generalized procedure involved (working days) Cost to complete Comment 1 Seller obtains the technical Organizations of technical 3 days - 1 month 10-20 rubles for 1 sq.m. of Price by agreement passport at the organizations of inventory building technical inventory 2 Seller obtains the cadastral plan The Federal Cadastre Agency 14 days - 1 month 150 ­ 300 rubles Price is regulated by regional legislation of the land plot in the regional department of the Federal Cadastre Agency 3 Seller obtains the excerpts from The Federal Registration 1 - 2 days 300 rubles for legal Usually not requested by the Federal the Unified State Register of Real Service entities, 100 rubles for Registration Service, but it may be obtained Estate Property physical person at Buyer's request to help mitigate risk 4 Buyer/Seller obtains an excerpt Tax inspection 1 - 5 days 200 rubles for 1 excerpt, Usually not requested by the Federal from the Unified State Register 400 rubles for expedited Registration Service, but it may be obtained of Legal Entities containing the procedure to help mitigate risk information about Seller/Buyer 5 Notarization of corporate Notary 1 day 10 rubles per page to Not mandatory. The Federal Registration documents by Seller and Buyer 500 rubles per a document Service has the right to notarize copies of documents in presence of originals at the discretion of the officer of the Registration Service 6 Registration of the transfer of the The Federal Registration 1 month 15,000 rubles 7,500 rubles (land plot) + 7500 rubles building and the land plot at the Service (building) regional department of the Federal Registration Service proceDures 39 Procedures required to register property, by city Time (days), cost (rubles) Rostov- St. Irkutsk Kazan Moscow Perm Petrozavodsk Tomsk Tver Voronezh on-Don Petersburg Seller obtains technical passport Time 19 60 19 30 3 35 3 17 3 7 at the organizations of technical Cost 10,400 1,200 1,494 6,500 2,420 25,000 2,600 10,000 2,600 15,000 inventory Seller obtains a plan-certificate Time 11 ("plan-spravka") at the Republican Cost 1,750 State Center "Nedvizhimost" (Petrozavodsk only) Seller obtains the cadastral plan Time 20 19 19 19 18 30 19 14 17 25 at the Federal Cadastre Agency Cost 29 6 5,472 500 60 6 18 12 5 Seller obtains the extracts from Time 4 1 7 3 2 2 2 2 5 6 the Unified State Register of Cost 300 300 300 300 300 300 350 300 300 300 Real Estate Property Buyer or Seller obtains the ex- Time 1 3 1 1 3 3 1 5 5 6 tract from Unified State Register Cost 400 200 400 400 200 200 400 400 200 200 of Legal Entities containing the information about Seller/Buyer Notarization of corporate Time 2 2 1 1 2 2 1 documents by Seller and Buyer Cost 1,060 500 500 550 500 1.060 550 Registration of the transfer of Time 30 20 30 30 30 30 95 30 30 30 the building and the land plot at Cost 15,000 15,000 15,000 15,000 15,000 15,000 15.000 15,000 15,000 15,000 the regional department of the Federal Registration Service source: Doing Business database. 40 Doing Business in russia 2009 Acknowledgments Contact details of local partners are available on the Doing Business website at http://www.doingbusiness.org. Doing Business in Russia 2009 was prepared by a team led by Igor Artemiev and Svetlana Bagaudinova. The team was comprised of Umar Shavurov, Gulmira McHale, Natalie Larionov, Jasur Tishaev and Tatyana Ponomareva of the WBG and Alyona Serova, Dmitry Sanatov, Ekaterina Kotova, Evgeniya Kolesova, Irina Smirnova, Marina Lipetskaya, Marina Zhuravleva, Sergei Kostyushev, Viktoria Movily, Yury Ryabov of the Foundation "Center for Strategic Research "North-West". The St.Petersburg team was led by Vladimir Knyaginin. Valuable assistance was received from the Subnational Doing Business team. Copyediting services were provided by Cintra Scott. The report was reviewed by Mierta Capaul, Donato de Rosa, Hester Marie DeCasper, Iva Ilieva, Marialisa Motta, Marsha Olive, Jana Malinska and Samir Suleymanov. The project was made possible thanks to the invaluable contribution of more than 200 government officials, businessmen, lawyers and business intermediaries across 10 regions participated in the analysis. The team extends special gratitude to the public officials in the 10 regions that participated in the project. The project was funded by the World Bank Group and by the Foundation "Center for Strategic Research "North-West" (www.csr-nw.ru), located in St. Petersburg. THE WORLD BANK HT TP: //SUBNATIONAL.DOINGBUSINESS.ORG