Doing Business 2016 Maldives 100787 Economy Profile 2016 Maldives Doing Business 2016 Maldives 2 © 2016 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 18 17 16 15 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2016 Maldives 3 CONTENTS Introduction .................................................................................................................................. 4 Starting a business ..................................................................................................................... 16 Dealing with construction permits ........................................................................................... 22 Getting electricity ....................................................................................................................... 32 Registering property .................................................................................................................. 40 Getting credit .............................................................................................................................. 49 Protecting minority investors ................................................................................................... 54 Paying taxes ................................................................................................................................ 60 Trading across borders .............................................................................................................. 65 Enforcing contracts .................................................................................................................... 71 Resolving insolvency .................................................................................................................. 78 Labor market regulation ........................................................................................................... 85 Distance to frontier and ease of doing business ranking ...................................................... 91 Resources on the Doing Business website .............................................................................. 95 Doing Business 2016 Maldives 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is also provides data for other selected economies for a local entrepreneur to open and run a small to (comparator economies) for each indicator. The data in medium-size business when complying with relevant this report are current as of June 1, 2015 (except for the regulations. It measures and tracks changes in paying taxes indicators, which cover the period January– regulations affecting 11 areas in the life cycle of a December 2014). business: starting a business, dealing with construction The Doing Business methodology has limitations. Other permits, getting electricity, registering property, getting areas important to business—such as an economy’s credit, protecting minority investors, paying taxes, proximity to large markets, the quality of its trading across borders, enforcing contracts, resolving infrastructure services (other than those related to insolvency and labor market regulation. Doing Business trading across borders and getting electricity), the 2016 presents the data for the labor market regulation security of property from theft and looting, the indicators in an annex. The report does not present transparency of government procurement, rankings of economies on labor market regulation macroeconomic conditions or the underlying strength of indicators or include the topic in the aggregate distance institutions—are not directly studied by Doing Business. to frontier score or ranking on the ease of doing The indicators refer to a specific type of business, business. generally a local limited liability company operating in In a series of annual reports Doing Business presents the largest business city. Because standard assumptions quantitative indicators on business regulations and the are used in the data collection, comparisons and protection of property rights that can be compared benchmarks are valid across economies. The data not across 189 economies, from Afghanistan to Zimbabwe, only highlight the extent of obstacles to doing business; over time. The data set covers 47 economies in Sub- they also help identify the source of those obstacles, Saharan Africa, 32 in Latin America and the Caribbean, 25 supporting policy makers in designing regulatory reform. in East Asia and the Pacific, 25 in Eastern Europe and More information is available in the full report. Doing Central Asia, 20 in the Middle East and North Africa and Business 2016 presents the indicators, analyzes their 8 in South Asia, as well as 32 OECD high-income relationship with economic outcomes and presents economies. The indicators are used to analyze economic business regulatory reforms. The data, along with outcomes and identify what reforms have worked, where information on ordering Doing Business 2016, are and why. available on the Doing Business website at This economy profile presents the Doing Business http://www.doingbusiness.org. indicators for Maldives. To allow useful comparison, it Doing Business 2016 Maldives 5 CHANGES IN DOING BUSINESS 2016 As part of a two-year update in methodology, Doing The case study underlying the trading across borders Business 2016 expands the focus of five indicator sets indicators has been changed to increase its relevance. (dealing with construction permits, getting electricity, For each economy the export product and partner are registering property, enforcing contracts and labor now determined on the basis of the economy’s market regulation), substantially revises the comparative advantage, the import product is auto parts, methodology for one indicator set (trading across and the import partner is selected on the basis of which borders) and implements small updates to the economy has the highest trade value in that product. The methodology for another (protecting minority investors). indicators continue to measure the time and cost to export and import. The indicators on dealing with construction permits now include an index of the quality of building regulation and Beyond these changes there is one other update in its implementation. The getting electricity indicators now methodology, for the protecting minority investors include a measure of the price of electricity consumption indicators. A few points for the extent of shareholder and an index of the reliability of electricity supply and governance index have been fine-tuned, and the index transparency of tariffs. Starting this year, the registering now also measures aspects of the regulations applicable property indicators include an index of the quality of the to limited companies rather than privately held joint land administration system in each economy in addition stock companies. to the indicators on the number of procedures and the For more details on the changes, see the “What is time and cost to transfer property. And for enforcing changing in Doing Business?” chapter starting on page contracts an index of the quality and efficiency of judicial 27 of the Doing Business 2016 report. For more details processes has been added while the indicator on the on the data and methodology, please see the “Data number of procedures to enforce a contract has been Notes” chapter starting on page 119 of the Doing dropped. Business 2016 report. For more details on the distance to The scope of the labor market regulation indicator set frontier metric, please see the “Distance to frontier and has also been expanded, to include more areas capturing ease of doing business ranking” chapter in this profile. aspects of job quality. The labor market regulation indicators continue to be excluded from the aggregate distance to frontier score and ranking on the ease of doing business. Doing Business 2016 Maldives 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing business Region: South Asia based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: Upper middle income businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of doing business ranking. Population: 351,572 Doing Business presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 7,290 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier scores, DB2016 rank: 128 rounded to two decimals. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where DB2015 rank: 125* 0 represents the worst performance and 100 the frontier. Change in rank: -3 (See the chapter on the distance to frontier and ease of doing business). DB 2016 DTF: 55.04 The ease of doing business ranking compares economies with one another; the distance to frontier score DB 2015 DTF: 55.05 benchmarks economies with respect to regulatory best practice, showing the absolute distance to the best Change in DTF: -0.01 performance on each Doing Business indicator. When compared across years, the distance to frontier score * DB2015 ranking shown is not last year’s published shows how much the regulatory environment for local ranking but a comparable ranking for DB2015 that entrepreneurs in an economy has changed over time in captures the effects of such factors as data revisions absolute terms, while the ease of doing business ranking and the changes in methodology. See the data notes can show only how much the regulatory environment has starting on page 119 of the Doing Business 2016 changed relative to that in other economies. report for sources and definitions. The 10 topics included in the ranking in Doing Business 2016: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The labor market regulation indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented in the economy profile. Doing Business 2016 Maldives THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2016 Maldives THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How Maldives and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2016 Maldives 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Maldives (Scale: Rank 189 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - Maldives (Scale: Score 0 center, Score 100 outer edge) Source: Doing Business database. Note: The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Doing Business 2016 Maldives 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier score. tells only part of the story, so do changes in that ranking. This measure shows how far on average an economy is Yearly movements in rankings can provide some indication from the best performance achieved by any economy on of changes in an economy’s regulatory environment for each Doing Business indicator. firms, but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed over time—how far it has moved toward (or away from) in different areas. To aid in assessing such changes, the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has Maldives come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits, registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are only comparable to 2014. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 119 of the Doing Business 2016 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2016 Maldives 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for Maldives Best performer globally Indonesia DB2016 Mauritius DB2016 Sri Lanka DB2016 Maldives DB2016 Maldives DB2015 Indicator Nepal DB2016 India DB2016 DB2016 Starting a Business (rank) 48 47 155 173 37 105 98 New Zealand (1) Starting a Business (DTF 91.26 91.07 73.59 66.04 92.49 83.48 84.98 New Zealand (99.96) Score) Procedures (number) 5.0 5.0 12.9 13.0 5.0 7.0 8.0 New Zealand (1.00)* Time (days) 9.0 9.0 29.0 47.8 6.0 17.0 10.0 New Zealand (0.50) Cost (% of income per 4.9 6.2 13.5 19.9 2.0 28.4 18.7 Slovenia (0.00) capita) Paid-in min. capital (% of 1.7 2.3 0.0 31.0 0.0 0.0 0.0 105 Economies (0.00)* income per capita) Dealing with Construction 41 32 183 107 35 78 77 Singapore (1) Permits (rank) Dealing with Construction 75.36 76.75 32.47 66.68 76.51 70.25 70.39 Singapore (92.97) Permits (DTF Score) Procedures (number) 10.0 9.0 33.6 17.0 15.0 10.0 12.0 5 Economies (7.00)* Time (days) 140.0 140.0 191.5 210.2 156.0 86.0 116.0 Singapore (26.00) Doing Business 2016 Maldives 12 Best performer globally Indonesia DB2016 Mauritius DB2016 Sri Lanka DB2016 Maldives DB2016 Maldives DB2015 Indicator Nepal DB2016 India DB2016 DB2016 Cost (% of warehouse 0.5 0.2 26.0 3.8 0.6 8.3 0.2 Qatar (0.00) value) Building quality control 8.5 8.5 11.0 13.0 13.0 9.0 5.5 New Zealand (15.00) index (0-15) Getting Electricity (rank) 141 142 70 46 41 131 81 Korea, Rep. (1) Getting Electricity (DTF 53.65 53.36 74.56 80.73 81.93 57.51 70.82 Korea, Rep. (99.88) Score) Procedures (number) 6.0 6.0 5.0 5.0 4.0 5.0 5.0 14 Economies (3.00)* Time (days) 91.0 91.0 90.1 79.0 81.0 70.0 100.0 Korea, Rep. (18.00)* Cost (% of income per 296.8 391.5 442.3 383.0 260.0 1,134.9 829.5 Japan (0.00) capita) Reliability of supply and transparency of tariff 0.0 0.0 5.5 7.0 6.0 0.0 5.0 18 Economies (8.00)* index (0-8) Registering Property 171 169 138 131 99 72 153 New Zealand (1) (rank) Registering Property (DTF 39.97 39.97 50.29 52.41 61.18 66.96 46.76 New Zealand (94.46) Score) Procedures (number) 6.0 6.0 7.0 5.0 4.0 3.0 9.0 4 Economies (1.00)* Time (days) 57.0 57.0 47.0 27.4 14.0 5.0 51.0 3 Economies (1.00)* Cost (% of property value) 15.9 16.2 7.5 10.8 10.6 4.8 5.1 Saudi Arabia (0.00) Quality of the land administration index (0- 8.5 8.5 7.0 8.3 14.0 5.5 3.5 3 Economies (28.50)* 30) Getting Credit (rank) 126 118 42 70 42 133 97 New Zealand (1) Doing Business 2016 Maldives 13 Best performer globally Indonesia DB2016 Mauritius DB2016 Sri Lanka DB2016 Maldives DB2016 Maldives DB2015 Indicator Nepal DB2016 India DB2016 DB2016 Getting Credit (DTF Score) 35 35 65 55 65 30 45 New Zealand (100) Strength of legal rights 2.0 2.0 6.0 5.0 6.0 6.0 3.0 3 Economies (12.00)* index (0-12) Depth of credit 5.0 5.0 7.0 6.0 7.0 0.0 6.0 26 Economies (8.00)* information index (0-8) Credit registry coverage 15.6 17.3 0.0 48.5 82.6 0.0 0.0 Portugal (100.00) (% of adults) Credit bureau coverage 0.0 0.0 22.0 0.0 0.0 1.3 50.3 22 Economies (100.00)* (% of adults) Protecting Minority 134 133 8 88 29 57 49 Singapore (1)* Investors (rank) Protecting Minority 43.33 43.33 73.33 53.33 65 58.33 60 Singapore (83.33)* Investors (DTF Score) Strength of minority investor protection index 4.3 4.3 7.3 5.3 6.5 5.8 6.0 3 Economies (8.30)* (0-10) Extent of conflict of interest regulation index 5.3 5.3 6.7 5.7 7.7 5.3 6.0 Singapore (9.30)* (0-10) Extent of shareholder 3.3 3.3 8.0 5.0 5.3 6.3 6.0 4 Economies (8.00)* governance index (0-10) United Arab Emirates Paying Taxes (rank) 128 132 157 148 13 124 158 (1)* United Arab Emirates Paying Taxes (DTF Score) 65.31 64.35 56.14 60.46 91.92 66.5 55.23 (99.44)* Payments (number per Hong Kong SAR, China 30.0 30.0 33.0 54.0 8.0 34.0 47.0 year) (3.00)* Time (hours per year) 394.5 413.0 243.0 234.0 152.0 334.0 167.0 Luxembourg (55.00) Doing Business 2016 Maldives 14 Best performer globally Indonesia DB2016 Mauritius DB2016 Sri Lanka DB2016 Maldives DB2016 Maldives DB2015 Indicator Nepal DB2016 India DB2016 DB2016 Total tax rate (% of profit) 30.2 30.2 60.6 29.7 22.4 29.5 55.2 Ireland (25.90) Trading Across Borders 137 136 133 105 66 60 90 Denmark (1)* (rank) Trading Across Borders 55.87 55.87 56.45 64.75 80.05 81.6 70.7 Denmark (100)* (DTF Score) Time to export: Border 42 42 109 39 48 64 43 15 Economies (0.00)* compliance (hours) Cost to export: Border 596 596 413 254 269 226 366 18 Economies (0.00)* compliance (USD) Time to export: Documentary compliance 48 48 41 72 9 19 76 Jordan (0.00) (hours) Cost to export: Documentary compliance 300 300 102 170 128 85 58 20 Economies (0.00)* (USD) Time to import: Border 100 100 287 99 48 30 72 19 Economies (0.00)* compliance (hours) Cost to import: Border 981 981 574 383 294 156 300 28 Economies (0.00)* compliance (USD) Time to import: Documentary compliance 61 61 63 144 9 48 58 21 Economies (1.00)* (hours) Cost to import: Documentary compliance 180 180 145 160 166 80 283 30 Economies (0.00)* (USD) Enforcing Contracts (rank) 95 95 178 170 27 152 161 Singapore (1) Enforcing Contracts (DTF 57.66 57.66 32.41 35.37 70.5 45.26 39.31 Singapore (84.91) Score) Time (days) 665.0 665.0 1,420.0 471.0 519.0 910.0 1,318.0 Singapore (150.00) Doing Business 2016 Maldives 15 Best performer globally Indonesia DB2016 Mauritius DB2016 Sri Lanka DB2016 Maldives DB2016 Maldives DB2015 Indicator Nepal DB2016 India DB2016 DB2016 Cost (% of claim) 16.5 16.5 39.6 115.7 25.0 26.8 22.8 Iceland (9.00) Quality of judicial 6.5 6.5 7.5 6.3 13.0 5.5 7.5 3 Economies (15.50)* processes index (0-18) Resolving Insolvency 135 134 136 77 39 86 78 Finland (1) (rank) Resolving Insolvency (DTF 33.02 33.12 32.59 46.48 65.94 44.19 46.4 Finland (93.81) Score) Recovery rate (cents on 49.7 49.9 25.7 31.2 67.4 41.5 45.6 Japan (92.90) the dollar) Time (years) 1.5 1.5 4.3 1.9 1.7 2.0 1.7 Ireland (0.40) Cost (% of estate) 4.0 4.0 9.0 21.6 14.5 9.0 10.0 Norway (1.00) Outcome (0 as piecemeal sale and 1 as going 0 0 0 0 1 0 0 concern) Strength of insolvency 2.0 2.0 6.0 9.5 9.5 7.0 7.0 4 Economies (15.00)* framework index (0-16) Source: Doing Business database. Note: DB2015 rankings shown are not last year’s published rankings but comparable rankings for DB2015 that capture the effects of such factors as data revisions and changes to the methodology. The global best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2016 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” mark if regulation exists bu t is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Doing Business 2016 Maldives 16 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city 1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Time required to complete each procedure generating more revenue for the government. (calendar days) What do the indicators cover? Does not include time spent gathering information Doing Business records all procedures officially required, or commonly done in practice, for an Each procedure starts on a separate day (2 entrepreneur to start up and formally operate an procedures cannot start on the same day). industrial or commercial business, as well as the time Procedures that can be fully completed and cost to complete these procedures and the paid- online are recorded as ½ day. in minimum capital requirement. These procedures Procedure completed once final document is include obtaining all necessary licenses and permits received and completing any required notifications, verifications or inscriptions for the company and No prior contact with officials employees with relevant authorities. The ranking of Cost required to complete each procedure economies on the ease of starting a business is (% of income per capita) determined by sorting their distance to frontier scores for starting a business. These scores are the Official costs only, no bribes simple average of the distance to frontier scores for No professional fees unless services required each of the component indicators. by law or commonly used in practice To make the data comparable across economies, Paid-in minimum capital (% of income several assumptions about the business and the per capita) procedures are used. It is assumed that any required information is readily available and that the Deposited in a bank or with a notary before entrepreneur will pay no bribes. Assumptions about registration (or within 3 months) the business:  Is a limited liability company (or its legal  Has a start-up capital of 10 times income per equivalent), located in the largest business city capita and a turnover of at least 100 times 1 and is 100% domestically owned with five income per capita. owners, none of whom is a legal entity.  Has a company deed 10 pages long.  Has at least 10 and up to 50 employees, all of  Does not qualify for any special benefits. them domestic nationals.  Leases the commercial plant or offices and is not  Performs general commercial or industrial a proprietor of real estate. activities. 1 For 11 economies the data are also collected for the second largest business city. Doing Business 2016 Maldives 17 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Maldives? largest business city of an economy, except for 11 According to data collected by Doing Business, starting a economies for which the data are a population-weighted business there requires 5.00 procedures, takes 9.00 days, average of the 2 largest business cities. See the chapter costs 4.90% of income per capita and requires paid-in on distance to frontier and ease of doing business minimum capital of 1.70% of income per capita (figure ranking at the end of this profile for more details. 2.1). Most indicator sets refer to a case scenario in the Figure 2.1 What it takes to start a business in Maldives Paid-in minimum capital (% of income per capita): 1.70 Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2016 Maldives 18 STARTING A BUSINESS Globally, Maldives stands at 48 in the ranking of 189 average ranking provide other useful information for economies on the ease of starting a business (figure 2.2). assessing how easy it is for an entrepreneur in Maldives The rankings for comparator economies and the regional to start a business. Figure 2.2 How Maldives and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2016 Maldives 19 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Maldives is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new Legal form: Limited Liability Company firm. These are identified by Doing Business through collaboration with relevant local professionals and Paid-in minimum capital requirement: MVR the study of laws, regulations and publicly available 2,000 information on business entry in that economy. City: Malé Following is a detailed summary of those procedures, along with the associated time and cost. These Start-up Capital: 10 times GNI per capita procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Table 2.2 Summary of time, cost and procedures for starting a business in Maldives Time to No. Procedure Cost to complete complete Reserve a unique company name and obtain the standard forms for incorporation The Companies Act 1996 governs the rules on acceptable company names. To make the incorporation process easier, the Registrar of Companies provides standard memorandum and articles of association. 1 day no charge 1 The standard forms are downloadable on the web. No fees apply for the name confirmation. Agency: Registrar of Companies Pay registration fees Since January 2010, registration fees are paid at the Ministry of Economic Development. fees included in 2 1 day procedure 3 Agency: Ministry of Economic Development Register at the Registrar of Companies and Apply for a Tax Identification Number (TIN) The company must apply for registration with the Companies Registrar, MVR 2,000 annual by submitting the following documents: company fee + • Company registration application form; registration fee (see 3 5 days • Taxpayer registration (Maldives Inland Revenue Authority the comment) + Form No. 101S) MVR 500 stamp • Name search approval form duty • Memorandum of Association – 2 copies • Articles of Association – 2 copies • Acceptance letter from Managing Director Doing Business 2016 Maldives 20 Time to No. Procedure Cost to complete complete • Acceptance letter from Company Secretary • National Identification card copies of all relevant individuals (shareholders, company secretary, board of directors); The forms may be printed at: http://trade.gov.mv/beta/?page=company-registration The schedule of the Companies Act 1996 sets the company registration fees based on a sliding scale of authorized share capital. If the authorized capital is MVR 10,000 or less, the fee is MVR 1,000. If authorized capital is more than MVR 10,000, an additional fee is payable on every MVR 4,000 or part thereof of the authorized capital, as follows: • Between MVR 10,000 and MVR 500,000: MVR 10. • Between MVR 500,000 and MVR 4,000,000: MVR 4. • Between MVR 4,000,000 and MVR 8,000,000: MVR 2. • Above MVR 8,000,000: MVR 1. In addition to this sliding-scale fee, public companies must pay an annual fee of MVR 10,000 before the end of March every year; private companies must pay MVR 2,000. The stamp duty is MVR 500, payable at registration. Upon approval of registration, the company will receive the origination certificate, registration letter, endorsed Memorandum and Articles of Association. When the company information is submitted to the Companies Registrar, the Registrar automatically submits Taxpayer registration (Maldives Inland Revenue Authority Form No. 101S) to MIRA for tax registration. In practice company registration process takes about 1 week to complete. Agency: Registrar of Companies Make a company seal The Companies Act 1996 requires all companies to make a company seal and register it with the Registrar of Companies. 1 day MVR 250 4 Agency: Seal maker Register the company seal with the Registrar of Companies Business founders must register the company seal with the Registrar of Companies. 1 day no charge 5 Agency: Registrar of Companies * Takes place simultaneously with another procedure. Doing Business 2016 Maldives 21 Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Doing Business 2016 Maldives 22 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records all procedures required for a Obtaining utility connections for water and business in the construction industry to build a sewerage warehouse along with the time and cost to complete Registering and selling the warehouse after its each procedure. In addition, this year Doing Business completion introduces a new measure, the building quality Time required to complete each procedure control index, evaluating the quality of building (calendar days) regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and Does not include time spent gathering professional certification requirements. information The ranking of economies on the ease of dealing with Each procedure starts on a separate day. Procedures that can be fully completed online construction permits is determined by sorting their are recorded as ½ day distance to frontier scores for dealing with construction permits. These scores are the simple Procedure considered completed once final average of the distance to frontier scores for each of document is received the component indicators. No prior contact with officials To make the data comparable across economies, Cost required to complete each procedure (% several assumptions about the construction of warehouse value) company, the warehouse project and the utility Official costs only, no bribes connections are used. Building quality control index (0-15) Assumptions about the construction company Sum of the scores of six component indices: The construction company (BuildCo): Quality of building regulations (0-2)  Is a limited liability company (or its legal equivalent). Quality control before construction (0-1)  Operates in the economy’s largest business Quality control during construction (0-3) city. For 11 economies the data are also Quality control after construction (0-3) collected for the second largest business Liability and insurance regimes (0-2) city. Professional certifications (0-4)  Is 100% domestically and privately owned.  Has five owners, none of whom is a legal entity.  Is fully licensed and insured to carry out construction projects, such as building warehouses. Doing Business 2016 Maldives 23 The construction company (BuildCo) (continued):  Will be a new construction (there was no previous construction on the land), with no  Has 60 builders and other employees, all of trees, natural water sources, natural reserves them nationals with the technical expertise or historical monuments of any kind on the and professional experience necessary to plot. obtain construction permits and approvals.  Will have complete architectural and  Has at least one employee who is a technical plans prepared by a licensed licensed architect or engineer and architect. If preparation of the plans requires registered with the local association of such steps as obtaining further architects or engineers. BuildCo is not documentation or getting prior approvals assumed to have any other employees who from external agencies, these are counted as are technical or licensed experts, such as procedures. geological or topographical experts.  Will include all technical equipment required  Has paid all taxes and taken out all to be fully operational. necessary insurance applicable to its general business activity (for example,  Will take 30 weeks to construct (excluding all accidental insurance for construction delays due to administrative and regulatory workers and third-person liability). requirements).  Owns the land on which the warehouse will be built and will sell the warehouse upon Assumptions about the utility connections its completion. The water and sewerage connections:  Is valued at 50 times income per capita.  Will be 150 meters (492 feet) from the Assumptions about the warehouse existing water source and sewer tap. If there The warehouse: is no water delivery infrastructure in the economy, a borehole will be dug. If there is  Will be used for general storage activities, no sewerage infrastructure, a septic tank in such as storage of books or stationery. The the smallest size available will be installed or warehouse will not be used for any goods built. requiring special conditions, such as food, chemicals or pharmaceuticals.  Will not require water for fire protection reasons; a fire extinguishing system (dry  Will have two stories, both above ground, system) will be used instead. If a wet fire with a total constructed area of protection system is required by law, it is approximately 1,300.6 square meters assumed that the water demand specified (14,000 square feet). Each floor will be 3 below also covers the water needed for fire meters (9 feet, 10 inches) high. protection.  Will have road access and be located in the  Will have an average water use of 662 liters periurban area of the economy’s largest (175 gallons) a day and an average business city (that is, on the fringes of the wastewater flow of 568 liters (150 gallons) a city but still within its official limits). For 11 day. Will have a peak water use of 1,325 liters economies the data are also collected for (350 gallons) a day and a peak wastewater the second largest business city. flow of 1,136 liters (300 gallons) a day.  Will not be located in a special economic  Will have a constant level of water demand or industrial zone. Will be located on a land and wastewater flow throughout the year. plot of approximately 929 square meters (10,000 square feet) that is 100% owned by  Will be 1 inch in diameter for the water BuildCo and is accurately registered in the connection and 4 inches in diameter for the cadastre and land registry. sewerage connection. Doing Business 2016 Maldives 24 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build business city of an economy, except for 11 economies for a warehouse in Maldives? According to data collected by which the data are a population-weighted average of the Doing Business, dealing with construction permits there 2 largest business cities. See the chapter on distance to requires 10.00 procedures, takes 140.00 days and costs frontier and ease of doing business ranking at the end of 0.50% of the warehouse value (figure 3.1). Most this profile for more details. indicator sets refer to a case scenario in the largest Figure 3.1 What it takes to comply with formalities to build a warehouse in Maldives Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. . Doing Business 2016 Maldives 25 DEALING WITH CONSTRUCTION PERMITS Globally, Maldives stands at 41 in the ranking of 189 economies and the regional average ranking provide economies on the ease of dealing with construction other useful information for assessing how easy it is for permits (figure 3.2). The rankings for comparator an entrepreneur in Maldives to legally build a warehouse. Figure 3.2 How Maldives and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2016 Maldives 26 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while an effort to ensure building safety while keeping making compliance easy and accessible to all. Coherent compliance costs reasonable, governments around the and transparent rules, efficient processes and adequate world have worked on consolidating permitting allocation of resources are especially important in sectors requirements. What construction permitting reforms has where safety is at stake. Construction is one of them. In Doing Business recorded in Maldives (table 3.1)? Table 3.1 How has Maldives made dealing with construction permits easier—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform The Maldives made dealing with construction permits more difficult by requiring that building plans be stamped and DB2016 approved by private structural and architectural checkers prior to requesting a building permit. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2016 Maldives 27 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Maldives are based BUILDING A WAREHOUSE on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Estimated value of information collected from experts in construction MVR 5,730,268 warehouse : licensing, including architects, civil engineers, construction lawyers, construction firms, utility City : Malé service providers and public officials who deal with building regulations. These procedures are those that apply to a company and structure matching the The procedures, along with the associated time and cost, standard assumptions used by Doing Business in are summarized below. collecting the data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in Maldives Time to No. Procedure Cost to complete complete Request and obtain permit to block the road/carry out site works A permit to block the road is required from the City Council. If a complete road block is not required, but if the site works would interrupt or affect the pedestrian or road traffic, a permit to carry 1 out site works is required. For both permits, relevant sign boards 7 days no charge are provided by the City Council and are required to be displayed at the work site. Agency: Malé City Council Request approval from the Malé City Council, depending on the road width The officials will check whether the excavation works are done 2 within the defined boundaries. 3 days no charge Agency: Malé City Council * Obtain approval of drawings from architectural and structural checkers According to the Male’ Planning Regulation of June 11, 2014, both architectural and structural drawings and plans must be approved and stamped by licensed architectural and structural 3 checkers. 1 day USD 1,301 Agency: Private expert Doing Business 2016 Maldives 28 Time to No. Procedure Cost to complete complete Obtain building permit BuildCo must submit an application to the Malé City Council (Building Approval Section), which approves the architectural and structural drawings. In the case of a building with two or more floors, the City Council also sends the drawings to the Ministry of Construction and Public Infrastructure for its approval. The cost 62 days MVR 3,902 4 is MVR 2.00 per sq. m. Significant under staffing of engineers can be a hurdle for companies in need of timely completion of their applications. Only two engineers service the entire city. Agency: Malé City Council Receive set out inspection from the Malé City Council The Malé City Council (Building Approval Section) checks the plot of land for any work done, height of adjacent houses, and width of the road for consistency with the measurements given 1 day no charge 5 in the drawings. Agency: Malé City Council Receive foundation inspection from the Malé City Council The Male’ City Council will inspect the foundation to ensure that it does not encroach on the other property. The Male’ City Council will not conduct any other inspections during 6 construction since the company manages that process internally 1 day no charge through a licensed professional. Agency: Malé City Council Apply for water and sewerage connection BuildCo must submit an application for connecting the warehouse to the main drinking water and sewage systems, based on the utility plans for the warehouse. The following documents must be provided: 1 day no charge 7 - National Identity Cards - The application forms - one for water and one for sewage - The plumbing drawings of the building. Agency: Malé Water and Sewage Company Receive inspection by Malé Water and Sewage Company 8 1 day no charge Agency: Malé Water and Sewage Company Doing Business 2016 Maldives 29 Time to No. Procedure Cost to complete complete Obtain water and sewage connection 9 34 days MVR 3,000 Agency: Malé Water and Sewage Company Obtain occupancy permit from Maldives Housing Urban Development Board After completion of the construction work, BuildCo must request 10 an occupancy permit. 30 days no charge Agency: Maldives Housing Urban Development Board * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Doing Business 2016 Maldives 30 DEALING WITH CONSTRUCTION PERMITS Building Quality Control Index The building quality control index is the sum of the The index ranges from 0 to 15, with higher values scores on the quality of building regulations, quality indicating better quality control and safety mechanisms in control before construction, quality control during the construction permitting system. construction, quality control after construction, The indicator is based on the same case study liability and insurance regimes, and professional assumptions as the measures of efficiency. certifications indices. Table 3.3 Summary of quality control and safety mechanisms in Maldives Answer Score Building quality control index (0-15) 8.50 Quality of building regulations index (0-2) 2.00 In what way are the building regulations (including the building code) or any regulations dealing with construction permits made Available online. 1.0 available? (0-1) List of required Which requirements for obtaining a building permit are clearly documents; Fees to be specified by the building regulations or by any accessible website, 1.0 paid; Required brochure or pamphlet? (0-1) preapprovals. Quality control before construction index (0-1) 1.00 Who is part of the committee or team that reviews and approves Licensed architect; building permit applications in the relevant permit-issuing 1.0 Licensed engineer. agency? (0-1) Quality control during construction index (0-3) 2.00 What types of inspections (if any) are required by law to be Inspections at various 1.0 carried out during construction? (0-2) phases. Mandatory inspections Do legally mandated inspections occur in practice during are always done in 1.0 construction? (0-1) practice. Quality control after construction index (0-3) 0.00 Is there a final inspection required by law to verify that the Final inspection is not building was built in accordance with the approved plans and 0.0 required by law. regulations? (0-2) Final inspection does Do legally mandated final inspections occur in practice? (0-1) 0.0 not occur in practice. Liability and insurance regimes index (0-2) 1.50 Which parties (if any) are held liable by law for structural flaws or Architect or engineer; 0.5 problems in the building once it is in use? (0-1) Owner or investor. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or problems in the Architect or engineer. 1.0 building once it is in use? (0-1) Doing Business 2016 Maldives 31 Answer Score Professional certifications index (0-4) 2.00 Minimum number of years of experience; What are the qualification requirements for the professional University degree in responsible for verifying that the architectural plans or drawings 2.0 architecture or are in compliance with existing building regulations? (0-2) engineering; Passing a certification exam. What are the qualification requirements for the professional who There are no specific 0.0 supervises the construction on the ground? (0-2) requirements. Source: Doing Business database. Doing Business 2016 Maldives 32 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity connection a customer is always to gain access by obtaining a (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to complete them. These Obtaining external installation works and procedures include applications and contracts with possibly purchasing material for these works electricity utilities, clearances from other agencies Concluding any necessary supply contract and and the external and final connection works. In obtaining final supply addition, this year Doing Business adds two new measures: the reliability of supply and transparency Time required to complete each procedure of tariffs index (included in the aggregate distance to (calendar days) frontier score and ranking on the ease of doing Is at least 1 calendar day business) and the price of electricity (omitted from these aggregate measures). The ranking of Each procedure starts on a separate day economies on the ease of getting electricity is Does not include time spent gathering determined by sorting their distance to frontier information scores for getting electricity. These scores are the Reflects the time spent in practice, with little simple average of the distance to frontier scores for follow-up and no prior contact with officials each of the component indicators. To make the data comparable across economies, several assumptions Cost required to complete each procedure (% are used. of income per capita) Assumptions about the warehouse Official costs only, no bribes The warehouse: Excludes value added tax  Is owned by a local entrepreneur. The reliability of supply and transparency of tariffs index  Is located in the economy’s largest business city. For 11 economies the data Sum of the scores of six component indices: are also collected for the second largest Duration and frequency of outages business city. Tools to monitor power outages  Is located in an area where similar warehouses are typically located. In this Tools to restore power supply area a new electricity connection is not Regulatory monitoring of utilities’ performance eligible for a special investment promotion Financial deterrents aimed at limiting outages regime (offering special subsidization or faster service, for example). Transparency and accessibility of tariffs  Is located in an area with no physical Price of electricity (cents per kilowatt-hour)* constraints. For example, the property is Price based on monthly bill for commercial not near a railway. warehouse in case study  Is a new construction and is being *Price of electricity is not included in the calculation of connected to electricity for the first time. distance to frontier nor ease of doing business ranking Doing Business 2016 Maldives 33 Assumptions about the monthly consumption The warehouse (continued):  It is assumed that the warehouse operates 8 hours a day for 30 days a month, with  Has two stories, both above ground, with a equipment utilized at 80% of capacity on total surface area of approximately 1,300.6 average, and that there are no electricity cuts square meters (14,000 square feet). The (assumed for simplicity). The subscribed plot of land on which it is built is 929 capacity of the warehouse is 140 kVA, with a square meters (10,000 square feet). power factor of 1 (1 kVA = 1 kW). The  Is used for storage of goods. monthly energy consumption is therefore 26,880 kWh, and the hourly consumption 112 kWh (26,880 kWh/30 days/8 hours). Assumptions about the electricity connection  If multiple electricity suppliers exist, the The electricity connection: warehouse is served by the cheapest supplier.  Is a permanent one.  Tariffs effective in March of the current year  Is a three-phase, four-wire Y, 140-kilovolt- are used for calculation of the price of ampere (kVA) (subscribed capacity) electricity for the warehouse. connection (where the voltage is 120/208 V, the current would be 400 amperes; where it is 230/400 B, the current would be nearly 200 amperes).  Is 150 meters long. The connection is to either the low-voltage or the medium- voltage distribution network and either overhead or underground, whichever is more common in the area where the warehouse is located.  Requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.  Includes only a negligible length in the customer’s private domain.  Will supply monthly electricity consumption of 26,880 kilowatt-hours (kWh).  Does not involve work to install the internal electrical wiring. This has already been completed, up to and including the customer’s service panel or switchboard and installation of the meter base. Doing Business 2016 Maldives 34 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection Most indicator sets refer to a case scenario in the largest in Maldives? According to data collected by Doing business city of an economy, except for 11 economies for Business, getting electricity there requires 6.00 which the data are a population-weighted average of the procedures, takes 91.00 days and costs 296.80% of 2 largest business cities. See the chapter on distance to income per capita (figure 4.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 4.1 What it takes to obtain an electricity connection in Maldives Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2016 Maldives 35 GETTING ELECTRICITY Globally, Maldives stands at 141 in the ranking of 189 average ranking provide another perspective in assessing economies on the ease of getting electricity (figure 4.2). how easy it is for an entrepreneur in Maldives to connect The rankings for comparator economies and the regional a warehouse to electricity. Figure 4.2 How Maldives and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2016 Maldives 36 GETTING ELECTRICITY What are the details? The indicators reported here for Maldives are based on a OBTAINING AN ELECTRICITY CONNECTION* set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility— Name of utility: State Electric Co. Ltd identified by Doing Business. Data are collected from the distribution utility, then completed and verified by Price of electricity electricity regulatory agencies and independent (US cents per kWh): 33 professionals such as electrical engineers, electrical contractors and construction companies. The electricity City: Malé distribution utility surveyed is the one serving the area (or areas) in which warehouses are located. If there is a *Price is calculated as a monthly consumption of 26,880 kWh choice of distribution utilities, the one serving the largest for business customers, based on a standardized case study number of customers is selected. adopted by the getting electricity methodology. Doing Business measures the price of electricity but does not include these The procedures are those that apply to a warehouse and data when calculating the distance to frontier score for getting electricity connection matching the standard electricity or the ranking on the ease of getting electricity. assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 4.2 Summary of time, cost and procedures for getting electricity in Maldives Time to No. Procedure Cost to complete complete Get load calculation and low-voltage panel drawings approved The process of getting the drawings approved by MEA is that the customer has to submit the detail LV panel drawings and the load calculation to MEA with a letter asking to approve the drawings. The approval process normally takes 2-4 working days and is free of charge. 3 calendar days MVR 0 1 This is a requirement to be provided along with the application form for electricity. Agency: Maldives Energy Authority Apply for and receive electrical installation testing by utility engineer The form for electrical installation testing application is available on the STELCO website. The electrical installation testing certification is done 9 calendar days MVR 100 2 solely by STELCO engineers. Agency: STELCO Doing Business 2016 Maldives 37 Time to No. Procedure Cost to complete complete Submit connection application to STELCO and await estimate The following documents need to be attached to application form: Installation testing application signed by a licensed electrical contractor. Electricity Connection Application signed by the owner, together with his national ID card (if not owner then please provide a valid power of attorney and original national ID card), Registration documents of the 14 calendar days MVR 0 3 plot issued by Male' Municipality, Load Calculation of the premise with LV panel drawings which are both approved by Maldives Energy Authority. Agency: STELCO Purchase materials, including low-voltage panel Customer has to purchase the LV panel (meter is included in the panel). Customer may also buy the cables, but utility also sells that, and 4 customer can either pay utility for it or someone else. 28 calendar days MVR 90,000 Agency: Customer Request and receive meter testing by STELCO The LV panel and meter has to be tested by STELCO, before they conduct external connection works. 7 calendar days MVR 50 5 Agency: STELCO Obtain external works, meter installation and turn-on of electricity In Male there is no specific location for warehouses hence it is difficult to point out a specific place where warehouses are clustered.10m is very unrealistic for Male, usually it will be approximately 200m. The meter is installed and tested (no separate procedure as the customer is not 30 calendar days MVR 250,000 6 involved). Electricity is turned on by the utility automatically after all external connection works are complete. Agency: STELCO * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2016 Maldives 38 GETTING ELECTRICITY Reliability of supply and transparency of tariffs index The reliability of supply and transparency of tariffs Doing Business uses the system average interruption index encompasses quantitative data on the duration duration index (SAIDI) and the system average and frequency of power outages as well as interruption frequency index (SAIFI) to measure the qualitative information on the mechanisms put in duration and frequency of power outages in the largest place by the utility for monitoring power outages business city of each economy (for 11 economies the data and restoring power supply, the reporting are also collected for the second largest business city). relationship between the utility and the regulator for SAIDI is the average total duration of outages over the power outages, the transparency and accessibility of course of a year for each customer served, while SAIFI is tariffs and whether the utility faces a financial the average number of service interruptions experienced deterrent aimed at limiting outages (such as a by a customer in a year. Annual data (covering the requirement to compensate customers or pay fines calendar year) are collected from distribution utility when outages exceed a certain cap). companies and national regulators on SAIDI and SAIFI. Both SAIDI and SAIFI estimates include load shedding. The index ranges from 0 to 8, with higher values indicating greater reliability of electricity supply and greater transparency of tariffs. Table 4.3 Reliability of Supply and Transparency of Tariff Index in Maldives Answer Score Reliability of supply and transparency of tariff index (0-8) 0.00 Total duration and frequency of outages per customer a year (0-3) 0.00 System average interruption duration index (SAIDI) .. System average interruption frequency index (SAIFI) .. Mechanisms for monitoring outages (0-1) 0.0 Does the distribution utility use automated tools to monitor outages? No Mechanisms for restoring service (0-1) 0.0 Does the distribution utility use automated tools to restore service? No Regulatory monitoring (0-1) 0.00 Does a regulator—that is, an entity separate from the utility—monitor No the utility’s performance on reliability of supply? Financial deterrents aimed at limiting outages (0-1) 0.00 Does the utility either pay compensation to customers or face fines by No the regulator (or both) if outages exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1.00 Are effective tariffs available online? Yes Link to the website, if available online http://www.stelco Doing Business 2016 Maldives 39 Answer Score .com.mv/tariff.ph p Are customers notified of a change in tariff ahead of the billing cycle? Yes Source: Doing Business database. Note: If data on power outages is not collected or if the SAIFI index or SAIDI index are above the threshold of 100, the economy is not eligible to obtain a score in the Reliability of Supply and Transparency of Tariff Index. If SAIDI and SAIFI are 12 (equivalent to an outage of one hour each month) or below, a score of 1 is assigned. If SAIDI and SAIFI are 4 (equivalent to an outage of one hour each quarter) or below, 1 additional point is assigned. Finally, if SAIDI and SAIFI are 1 (equivalent to an outage of one hour per year) or below, 1 more point is assigned. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. The price of electricity is measured in cents per kilowatt-hour. On the basis of the assumptions about monthly consumption, a monthly bill for a commercial warehouse in the largest business city of the economy is computed for the month of March. As noted, the warehouse uses electricity 30 days a month, from 9:00 a.m. to 5:00 p.m., so different tariff schedules may apply if a time-of-use tariff is available. Doing Business 2016 Maldives 40 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city 2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. In (calendar days) addition, this year Doing Business adds a new Does not include time spent gathering measure to the set of registering property information indicators, an index of the quality of the land administration system in each economy. The Each procedure starts on a separate day. ranking of economies on the ease of registering Procedures that can be fully completed online are recorded as ½ day. property is determined by sorting their distance to frontier scores for registering property. These scores Procedure considered completed once final are the simple average of the distance to frontier document is received scores for each of the component indicators. To No prior contact with officials make the data comparable across economies, several assumptions about the parties to the Cost required to complete each procedure transaction, the property and the procedures are (% of property value) used. Official costs only, no bribes The parties (buyer and seller): No value added or capital gains taxes included  Are limited liability companies, 100% Quality of land administration index (0-30) domestically and privately owned and  Is located in a periurban commercial zone, and perform general commercial activities and no rezoning is required. are located in the economy’s largest business city .  Has no mortgages attached, has been under 2 the same ownership for the past 10 years.  Have 50 employees each, all of whom are nationals.  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value and entire condition and complies with all safety property will be transferred. standards, building codes and legal  Is registered in the land registry or cada- requirements. There is no heating system. stre, or both, and is free of title disputes. 2 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2016 Maldives 41 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest Maldives? According to data collected by Doing Business, business city of an economy, except for 11 economies for registering property there requires 6.00 procedures, which the data are a population-weighted average of the takes 57.00 days and costs 15.90% of the property value 2 largest business cities. See the chapter on distance to (figure 5.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 5.1 What it takes to register property in Maldives Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2016 Maldives 42 REGISTERING PROPERTY Globally, Maldives stands at 171 in the ranking of 189 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Maldives to transfer property. Figure 5.2 How Maldives and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2016 Maldives 43 REGISTERING PROPERTY Economies worldwide have been making it easier for the time required substantially—enabling buyers to use entrepreneurs to register and transfer property—such as or mortgage their property earlier. What property by computerizing land registries, introducing time limits registration reforms has Doing Business recorded in for procedures and setting low fixed fees. Many have cut Maldives (table 5.1)? Table 5.1 How has Maldives made registering property easier—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform Maldives now allows registered companies to own land as DB2011 long as all company shares are owned by Maldivians. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2016 Maldives 44 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property lawyers, Property value: MVR 5,730,268 notaries and property registries. These procedures are those that apply to a transaction matching the City: Malé standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in Maldives Time to No. Procedure Cost to complete complete Check for encumbrances Due diligence searches may be lodged by anyone (including individuals) at the Male’ City Council in order to check whether any mortgages have been registered against a property. The request must include a consent 1 letter allowing the Male' City Council to share the information with the 7 days no cost person requesting the search. Agency: Male' City Council Apply to the Civil Court for the sale of the Land Lawyer fees may be applicable and may vary from lawyer to lawyer. Legal fees are estimated to be in the range of MRF 45,000- 55,000 for all court transactions in relation to the property sale. The documents submitted to the Civil Court for this procedure include: 1. Duly completed Land Sale Application Form of the Civil Court 30 days MRF 45,000- (simultaneous 55,000 + MRF 25 2 2. Legal representation documents (Board Resolutions of companies with Procedures 3 for court appointing counsel and court formalities) & 4) administrative fees 3. Registration Certificate of the Buyer and the Seller 4. Copy of the Title Deed/Land Registration Certificate Agency: Civil Court Doing Business 2016 Maldives 45 Time to No. Procedure Cost to complete complete * Payment of the property transfer tax at the Inland Revenue Authority and obtaining a tax payment proof For taxation purposes, the value of the land is either the actual sale price of the land or the total price of the land calculated on the basis of MRF 14 days 1,400 per square feet, whichever total value is higher. This tax is paid at (simultaneous 15% of the value 3 the Inland Revenue Authority. Time required is between 7 - 14 working with Procedures 2 of the property days. & 4) Agency: Inland Revenue Authority * Submit detailed outline chart to Civil Court The detailed chart includes outlines of neighboring houses as well. The 3 days outline charts are done by the Male’ City Council. (simultaneous 4 no cost with Procedures 2 Agency: Male' City Council & 3) Obtain the Civil Court Report or Judgment in relation to the sale of property Lawyer fees and Lawyer fees may be applicable. Legal fees are estimated to be in the court fees of MVR range of MRF 45,000- 55,000 for all court transactions in relation to the 20 + MVR 1 per property sale. Time required for this Procedure is 10-15 workings days. 15 days page of the 5 The Court confirms that the transaction of property is completed and judgment report transferred to a new owner. (included in Agency: Civil Court procedure 2) Apply for registration at the Municipality The documents that need to be submitted for the above purpose include: MRF 50/- for 1. Originals of the registry/title documents of the current owner. issuing a Registry 6 5 days certificate MRF 2. Proof of payment of tax to the Government. 50/- for revenue stamp 3. The Civil Court Report or Judgment in relation to the sale of property. Agency: Male' City Council * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Doing Business 2016 Maldives 46 REGISTERING PROPERTY Quality of land administration The quality of land administration index is the sum of If private sector entities were unable to register property the scores on the reliability of infrastructure, transfers in an economy between June 2014 and June transparency of information, geographic coverage 2015, the economy receives a “no practice” mark on the and land dispute resolution indices. procedures, time and cost indicators. A “no practice” economy receives a score of 0 on the quality of land The index ranges from 0 to 30, with higher values administration index even if its legal framework includes indicating better quality of the land administration provisions related to land administration. system. Table 5.3 Summary of quality of land administration in Maldives Answer Score Quality of the land administration index (0-30) 8.50 Reliability of infrastructure index (0-8) 0.00 What is the institution in charge of immovable property registration? Male' City Council In what format are the majority of title or deed records kept in the largest business city—in a paper format or in a computerized format Paper 0.0 (scanned or fully digital)? Is there an electronic database for checking for encumbrances (liens, No 0.0 mortgages, restrictions and the like)? Ministry of Institution in charge of the plans showing legal boundaries in the Housing and largest business city: Infrastructure In what format are the majority of maps of land plots kept in the largest business city—in a paper format or in a computerized format Paper 0.0 (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information (geographic information No 0.0 system)? Is the information recorded by the immovable property registration Separate agency and the cadastral or mapping agency kept in a single database, 0.0 databases in different but linked databases or in separate databases? Do the immovable property registration agency and cadastral or No 0.0 mapping agency use the same identification number for properties? Transparency of information index (0–6) 0.00 Only Who is able to obtain information on land ownership at the agency in intermediaries 0.0 charge of immovable property registration in the largest business city? and interested parties Doing Business 2016 Maldives 47 Answer Score Is the list of documents that are required to complete any type of Yes, in person 0.0 property transaction made publicly available–and if so, how? Link for online access: Is the applicable fee schedule for any property transaction at the agency in charge of immovable property registration in the largest Yes, in person 0.0 business city made publicly available–and if so, how? Link for online access: Does the agency in charge of immovable property registration commit to delivering a legally binding document that proves property No 0.0 ownership within a specific time frame–and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that occurred at the agency in charge of immovable property No 0.0 registration? Contact information: Are there publicly available official statistics tracking the number of No 0.0 transactions at the immovable property registration agency? Number of property transfers in the largest business city in 2014: Only intermediaries Who is able to consult maps of land plots in the largest business city? 0.0 and interested parties Is the applicable fee schedule for accessing maps of land plots made Yes, in person 0.0 publicly available—and if so, how? Link for online access: Does the cadastral or mapping agency commit to delivering an updated map within a specific time frame—and if so, how does it No 0.0 communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about No 0.0 a problem that occurred at the cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 4.00 Are all privately held land plots in the economy formally registered at No 0.0 the immovable property registry? Doing Business 2016 Maldives 48 Answer Score Are all privately held land plots in the largest business city formally Yes 2.0 registered at the immovable property registry? Are all privately held land plots in the economy mapped? No 0.0 Are all privately held land plots in the largest business city mapped? Yes 2.0 Land dispute resolution index (0–8) 4.50 Does the law require that all property sale transactions be registered at the immovable property registry to make them opposable to third Yes 1.5 parties? Is the system of immovable property registration subject to a state or No 0.0 private guarantee? Is there a specific compensation mechanism to cover for losses incurred by parties who engaged in good faith in a property transaction No 0.0 based on erroneous information certified by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., checking the compliance of Yes 0.5 contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? . Does the legal system require verification of the identity of the parties Yes 0.5 to a property transaction? If yes, who is responsible for verifying the identity of the parties? . Is there a national database to verify the accuracy of identity No 0.0 documents? For a standard land dispute between two local businesses over tenure rights of a property worth 50 times gross national income (GNI) per Civil Court capita and located in the largest business city, what court would be in charge of the case in the first instance? How long does it take on average to obtain a decision from the first- Between 1 and 2 2.0 instance court for such a case (without appeal)? years Are there any statistics on the number of land disputes in the first No 0.0 instance? Number of land disputes in the largest business city in 2014: Source: Doing Business database. Doing Business 2016 Maldives 49 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders’ rights to view a potential borrower’s financial Strength of legal rights index (0–12) history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially movable property, as security to generate capital— Depth of credit information index (0–8) while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting Notes section of the Doing Business 2016 report). credit is determined by sorting their distance to These scenarios assume that the borrower: frontier scores for getting credit. These scores are the distance to frontier score for the strength of legal  Is a private limited liability company. rights index and the depth of credit information  Has its headquarters and only base of index. operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2016 Maldives 50 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, Maldives stands at 126 in the ranking of 189 and bankruptcy laws in Maldives facilitate access to economies on the ease of getting credit (figure 6.1). The credit? The economy has a score of 5.00 on the depth of rankings for comparator economies provide other useful credit information index and a score of 2.00 on the information for assessing how well regulations and strength of legal rights index (see the summary of institutions in Maldives support lending and borrowing. scoring at the end of this chapter for details). Higher scores indicate more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Maldives and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2016 Maldives 51 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for Maldives and shows the scores for indicators into context is to see where the economy comparator economies as well as the regional average stands in the distribution of scores across economies. score. Figure 6.3 shows the same for the depth of credit Figure 6.2 highlights the score on the strength of legal information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Source: Doing Business database. Source: Doing Business database. Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Doing Business 2016 Maldives 52 GETTING CREDIT What are the details? The getting credit indicators reported here for Maldives The data on the legal rights of borrowers and lenders are are based on detailed information collected in that gathered through a survey of financial lawyers and economy. The data on credit information sharing are verified through analysis of laws and regulations as well collected through a survey of a credit registry and/or as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, a credit information index, a score of 1 is assigned for each score of 1 is assigned for each of 10 aspects related to of 8 features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. Strength of legal rights index (0–12) Index score: 2.00 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents to security interests in movable No assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of No movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its Yes assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to No the products, proceeds or replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement include a Yes maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is No unified geographically and by asset type, with an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and No searches can be performed online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor No defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is No liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law protect secured creditors’ rights by No providing clear grounds for relief from the stay and/or sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell the collateral through public auction and No private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Doing Business 2016 Maldives 53 Depth of credit information index (0–8) Credit bureau Credit registry Index score: 5.00 Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative credit data distributed? No Yes 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - No No 0 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years No Yes 1 of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per No Yes 1 capita distributed? By law, do borrowers have the right to access their data No No 0 in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an online No Yes 1 platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions No No 0 assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of firms 0 1,073 Number of individuals 0 35,470 Total 0 36,543 Total percentage of adult population 0.00 15.60 Source: Doing Business database. Doing Business 2016 Maldives 54 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions; Disclosure requirements for related- What do the indicators cover? party transactions Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold indicators and shareholders’ rights in corporate interested directors liable for prejudicial related-party governance through another. The ranking of economies transactions; Available legal remedies (damages, on the strength of minority investor protections is disgorgement of profits, fines, imprisonment, determined by sorting their distance to frontier scores rescission of the transaction) for protecting minority investors. These scores are the Ease of shareholder suits index (0–10) simple average of the distance to frontier scores for the extent of conflict of interest regulation index and the Access to internal corporate documents; Evidence extent of shareholder governance index. To make the obtainable during trial and allocation of legal data comparable across economies, a case study uses expenses several assumptions about the business and the Extent of conflict of interest regulation index transaction. (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of shareholder indices  Is a publicly traded corporation listed on the economy’s most important stock exchange Extent of shareholder rights index (0-10) (or at least a large private company with Shareholders’ rights and role in major corporate multiple shareholders). decisions  Has a board of directors and a chief executive Extent of ownership and control index (0-10) officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Governance safeguards protecting shareholders from undue board control and entrenchment specifically required by law. Extent of corporate transparency index (0-10) The transaction involves the following details: Corporate transparency on ownership stakes,  Mr. James, a director and the majority compensation, audits and financial prospects shareholder of the company, proposes that the company purchase used trucks from Extent of shareholder governance index (0– another company he owns. 10)  The price is higher than the going price for Simple average of the extent of shareholders rights, used trucks, but the transaction goes forward. extent of ownership and control and extent of corporate transparency indices  All required approvals are obtained, and all required disclosures made, though the Strength of investor protection index (0–10) transaction is prejudicial to Buyer. Simple average of the extent of conflict of interest regulation and extent of shareholder governance  Shareholders sue the interested parties and indices the members of the board of directors. Doing Business 2016 Maldives 55 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in Maldives? The economy has a score of not measure all aspects related to the protection of 4.30 on the strength of minority investor protection minority investors, a higher ranking does indicate that an index, with a higher score indicating stronger economy’s regulations offer stronger minority investor protections. protections against self-dealing in the areas measured. Globally, Maldives stands at 134 in the ranking of 189 economies on the strength of minority investor Figure 7.1 How Maldives and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2016 Maldives 56 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the A summary of scoring for the protecting minority investors protecting minority investors indicators into context indicators at the end of this chapter provides details on is to see where the economy stands in the how the indices were calculated. distribution of scores across comparator economies. Figure 7.2 highlights the scores on the various minority investor protection indices for Maldives. Figure 7.2 Summary of the various minority investor protection indices for Maldives and comparator economies. Source: Doing Business database. Doing Business 2016 Maldives 57 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported to disclosure, director liability, shareholder suits, here for Maldives are based on detailed information shareholder rights, ownership and control and corporate collected through a survey of corporate and securities transparency in a standard case study (for more details, lawyers about securities regulations, company laws and see the Data Notes section of the Doing Business 2016 court rules of evidence and procedure. To construct the report). The summary below shows the details underlying six indicators on minority investor protection, scores are the scores for Maldives. assigned to each based on a range of conditions relating Table 7.2 Summary of scoring for the protecting minority investors indicators in Maldives Answer Score Strength of minority investor protection index (0-10) 4.30 Extent of conflict of interest regulation index (0-10) 5.30 Extent of disclosure index (0-10) 0.00 Which corporate body can provide legally sufficient CEO alone 0.0 approval for the Buyer-Seller transaction? (0-3) Is disclosure by the interested director to the board of No disclosure obligation 0.0 directors required? (0-2) Is disclosure of the transaction in published periodic filings No disclosure obligation 0.0 (annual reports) required? (0-2) Is immediate disclosure of the transaction to the public No disclosure obligation 0.0 and/or shareholders required? (0-2) Must an external body review the terms of the transaction No 0.0 before it takes place? (0-1) Extent of director liability index (0-10) 8.00 Can shareholders sue directly or derivatively for the damage caused by the Buyer-Seller transaction to the company? (0- Yes 1.0 1) Can shareholders hold the interested director liable for the Liable if unfair or prejudicial 2.0 damage caused by the transaction to the company? (0-2) Can shareholders hold members of the approving body liable for the damage cause by the transaction to the Liable if unfair or prejudicial 2.0 company? (0-2) Must the interested director pay damages for the harm caused to the company upon a successful claim by a Yes 1.0 shareholder plaintiff? (0-1) Must the interested director repay profits made from the transaction upon a successful claim by a shareholder Yes 1.0 plaintiff? (0-1) Is the interested director fined and imprisoned or disqualified upon a successful claim by the shareholder No 0.0 plaintiff? (0-1) Can a court void the transaction upon a successful claim by Voidable if negligently concluded 1.0 a shareholder plaintiff? (0-2) Ease of shareholder suits index (0-10) 8.00 Before filing suit, can shareholders owning 10% of the Yes 1.0 Doing Business 2016 Maldives 58 company’s share capital inspect the transaction documents? (0-1) Can the plaintiff obtain any documents from the defendant No 3.0 and witnesses during trial? (0-3) Can the plaintiff request categories of documents from the Yes 1.0 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and Yes 2.0 witnesses during trial? (0-2) Is the level of proof required for civil suits lower than that of No 0.0 criminal cases? (0-1) Can shareholder plaintiffs recover their legal expenses from Yes if successful 1.0 the company? (0-2) Extent of shareholder governance index (0-10) 3.30 Extent of shareholder rights index (0-10) 3.00 Does the sale of 51% of Buyer’s assets require shareholder No 0.0 approval? Can shareholders representing 10% of Buyer’s share capital No 0.0 call for an extraordinary meeting of shareholders? Must Buyer obtain its shareholders’ approval every time it Yes 1.0 issues new shares? Do shareholders automatically receive preemption rights No 0.0 every time Buyer issues new shares? Must shareholders approve the election and dismissal of the Yes 1.0 external auditor? Must changes to the voting rights of a class of shares be No 0.0 approved only by the holders of the affected shares? Assuming that Buyer is a limited company, does the sale of No 0.0 51% of Buyer’s assets requires shareholder approval? Assuming that Buyer is a limited company, can shareholders representing 10% of Buyer’s share capital call for an No 0.0 extraordinary meeting of shareholders? Assuming that Buyer is a limited company, must Buyer obtain its shareholders’ approval every time it issues new Yes 1.0 shares? Assuming that Buyer is a limited company, do shareholders automatically receive preemption rights every time Buyer No 0.0 issues new shares? Extent of ownership and control index (0-10) 3.00 Is the CEO prohibited from also being chair of the board of No 0.0 directors? Must the board of directors include independent and No 0.0 nonexecutive board members? Can shareholders remove members of Buyer’s board of Yes 1.0 directors without cause before the end of their term? Must Buyer’s board of directors include a separate audit No 0.0 committee? Must a potential acquirer make a tender offer to all No 0.0 shareholders upon acquiring 50% of Buyer? Must Buyer pay dividends within a maximum period set by No 0.0 law after the declaration date? Is a subsidiary prohibited from acquiring shares issued by its Yes 1.0 parent company? Doing Business 2016 Maldives 59 Assuming that Buyer is a limited company, can shareholders remove members of Buyer’s board of directors without Yes 1.0 cause before the end of their term? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to all shareholders upon No 0.0 acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer pay dividends within a maximum period set by law after the No 0.0 declaration date? Extent of corporate transparency index (0-10) 4.00 Must Buyer disclose direct and indirect beneficial ownership No 0.0 stakes representing 5%? Must Buyer disclose information about board members’ other directorships as well as basic information on their Yes 1.0 primary employment? Must Buyer disclose the compensation of individual No 0.0 managers? Must a detailed notice of general meeting be sent 30 days No 0.0 before the meeting? According to Article 67 of the Companies Act, every company shall, in the accounts stated in subsection (a) of section 66 specify the share capital of the company, Can shareholders representing 5% of Buyer’s share capital the paid up capital, the assets, 0.0 put items on the agenda for the general meeting? liabilities and information generally expected to be disclosed in relation to the assets and liabilities of the company and the manner in which all immovable properties of the company are valued. Must Buyer's annual financial statements be audited by an Yes 1.0 external auditor? Must Buyer disclose its audit reports to the public. No 0.0 Assuming that Buyer is a limited company, must a detailed notice of general meeting be sent 30 days before the No 0.0 meeting? Assuming that Buyer is a limited company, can shareholders representing 5% of Buyer’s share capital put items on the Yes 1.0 agenda for the general meeting? Assuming that Buyer is a limited company, must Buyer's annual financial statements be audited by an external Yes 1.0 auditor? Source: Doing Business database. Doing Business 2016 Maldives 60 PAYING TAXES Taxes are essential. The level of tax rates needs to be carefully chosen—and needless complexity in tax WHAT THE PAYING TAXES INDICATORS rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2014 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, Using a case scenario, Doing Business records the sales tax or goods and service tax) taxes and mandatory contributions that a medium- Method and frequency of filing and payment size company must pay in a given year as well as Time required to comply with 3 major taxes measures of the administrative burden of paying (hours per year) taxes and contributions. This case scenario uses a set of financial statements and assumptions about Collecting information and computing the tax transactions made over the year. Information is also payable compiled on the frequency of filing and payments as Completing tax return forms, filing with well as time taken to comply with tax laws. The proper agencies ranking of economies on the ease of paying taxes is Arranging payment or withholding determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are Preparing separate tax accounting books, if the simple average of the distance to frontier scores required for each of the component indicators, with a Total tax rate (% of profit before all taxes) threshold and a nonlinear transformation applied to one of the component indicators, the total tax rate . 3 Profit or corporate income tax All financial statement variables are proportional to Social contributions and labor taxes paid by 2012 income per capita. To make the data the employer comparable across economies, several assumptions Property and property transfer taxes are used. Dividend, capital gains and financial  TaxpayerCo is a medium-size business that transactions taxes started operations on January 1, 2013. Waste collection, vehicle, road and other taxes  The business starts from the same financial  Taxes and mandatory contributions include position in each economy. All the taxes corporate income tax, turnover tax and all and mandatory contributions paid during labor taxes and contributions paid by the the second year of operation are recorded. company.  Taxes and mandatory contributions are  A range of standard deductions and measured at all levels of government. exemptions are also recorded. The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. 3 The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Doing Business 2016 Maldives 61 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with 2 largest business cities. See the chapter on distance to taxes in Maldives—and how much do firms pay in taxes? frontier and ease of doing business ranking at the end of On average, firms make 30.00 tax payments a year, this profile for more details. spend 394.50 hours a year filing, preparing and paying Globally, Maldives stands at 128 in the ranking of 189 taxes and pay total taxes amounting to 30.20% of profit economies on the ease of paying taxes (figure 8.1). The (see the summary at the end of this chapter for details). rankings for comparator economies and the regional Most indicator sets refer to a case scenario in the largest average ranking provide other useful information for business city of an economy, except for 11 economies for assessing the tax compliance burden for businesses in which the data are a population-weighted average of the Maldives. Figure 8.1 How Maldives and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2016 Maldives 62 PAYING TAXES Economies around the world have made paying taxes and exemptions. Many have lowered tax rates. Changes faster, easier and less costly for businesses—such as by have brought concrete results. Some economies consolidating payments and filings of taxes, offering simplifying tax payment and reducing rates have seen electronic systems for filing and payment, establishing tax revenue rise. What tax reforms has Doing Business taxpayer service centers or allowing for more deductions recorded in Maldives (table 8.1)? Table 8.1 How has Maldives made paying taxes easier—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform Maldives introduced a goods and service tax, a business profit DB2013 tax and additional social contributions. Maldives made paying taxes easier for companies by DB2014 introducing electronic filing systems for corporate income tax, sales tax and pension contributions. Maldives made paying taxes easier for companies by introducing more payment counters at the tax authority and DB2016 express counters at peak periods. At the same time, Maldives introduced additional disclosure requirements for filing corporate income tax returns. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2016 Maldives 63 PAYING TAXES What are the details? The indicators reported here for Maldives are based LOCATION OF STANDARDIZED COMPANY on the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the section in this City: Malé chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of assumptions and transactions that the company The taxes and contributions paid are listed in the completed during its 2nd year of operation. summary below, along with the associated number of Respondents are asked how much taxes and payments, time and tax rate. mandatory contributions the business must pay and how these taxes are filed and paid. Table 8.2 Summary of tax rates and administration Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate On taxable profit in Business Profit Tax 3 94 0.15 excess of 13.11 MVR 500,000 Property transfer tax 1 0.15 sale price 9.09 gross Pension fund contributions 12 88 0.07 7.9 salaries A fixed amount of Rufiyaa 10,000/- is to be paid by all public Company annual fees 1 fixed fee 0.05 companies and Rufiyaa 2,000/- is to be paid by all private companies. Doing Business 2016 Maldives 64 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate MVR 1,800 annual fee, MVR 40 stamp for Vehicle registration fees 1 fixed fee 0.04 vehicles weight less than 2 tonns Employee pension fund gross 0 withheld 0.07 0 contributions salaries not Goods and Services Tax 12 213 0.06 Gross sales 0 included Totals 30.00 394.50 30.20 Source: Doing Business database. Doing Business 2016 Maldives 65 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE FOR IMPORT & EXPORT business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead Documentary compliance – cost (US$) & time to extra costs and delays for exporters and (hours) importers, stifling trade potential. Obtain, prepare and submit documents: What do the indicators cover? -During transport, clearance, inspections and port or border handling in origin economy Doing Business records the time and cost associated with the logistical process of exporting -Required by origin, transit and destination and importing goods. Under the new methodology economies introduced this year, Doing Business measures the Covers all documents by law and in practice time and cost (excluding tariffs) associated with Border compliance – cost (US$) & time (hours) three sets of procedures—documentary compliance, border compliance and domestic Customs clearance and inspections transport—within the overall process of exporting Inspections by other agencies or importing a shipment of goods. The ranking of Port or border handling economies on the ease of trading across borders is determined by sorting their distance to frontier Obtaining, preparing and submitting documents scores for trading across borders. These scores are during clearance, inspections and port or border the simple average of the distance to frontier handling scores for the time and cost for documentary Domestic transport* compliance and border compliance to export and Loading and unloading of shipment import. Transport between warehouse and terminal/port To make the data comparable across economies, a Transport between terminal/port and border few assumptions are made about the traded goods Obtaining, preparing and submitting documents and the transactions: during domestic transport Time Traffic delays and road police checks while shipment is en route  Time is measured in hours, and 1 day is 24 hours (for example, 22 days are * Although Doing Business collects and publishes data on the recorded as 22 × 24 = 528 hours). If time and cost for domestic transport, it does not use these customs clearance takes 7.5 hours, the data in calculating the distance to frontier score for trading data are recorded as is. Alternatively, across borders or the ranking on the ease of trading across suppose that documents are submitted borders. to a customs agency at 8:00 a.m., are Cost processed overnight and can be picked up at 8:00 a.m. the next day. In this case  Insurance cost and informal payments for which the time for customs clearance would be no receipt is issued are excluded from the costs recorded as 24 hours because the actual recorded. Costs are reported in U.S. dollars. procedure took 24 hours. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Doing Business 2016 Maldives 66 Assumptions of the case study  For each of the 189 economies covered by  Shipping cost based on weight is assumed to be Doing Business, it is assumed that a shipment greater than shipping cost based on volume. travels from a warehouse in the largest  If government fees are determined by the value business city of the exporting economy to a of the shipment, the value is assumed to be warehouse in the largest business city of the $50,000. importing economy. For 11 economies the data are also collected, under the same case  The product is new, not secondhand or used study assumptions, for the second largest merchandise. business city.  The exporting firm is responsible for hiring and  The import and export case studies assume paying for a freight forwarder or customs different traded products. It is assumed that broker (or both) and pays for all costs related to each economy imports a standardized international shipping, domestic transport, shipment of 15 metric tons of containerized clearance and mandatory inspections by auto parts (HS 8708) from its natural import customs and other government agencies, port partner—the economy from which it imports or border handling, documentary compliance the largest value (price times quantity) of auto fees and the like for exports. The importing firm parts. It is assumed that each economy is responsible for the above costs for imports. exports the product of its comparative  The mode of transport is the one most widely advantage (defined by the largest export used for the chosen export or import product value) to its natural export partner—the and the trading partner, as is the seaport, economy that is the largest purchaser of this airport or land border crossing. product. Precious metal and gems, live animals and pharmaceuticals are excluded  All electronic submissions of information from the list of possible export products, requested by any government agency in however, and the second largest product connection with the shipment are considered to category is considered as needed. be documents obtained, prepared and submitted during the export or import process.  To identify the trading partners and export product for each economy, Doing Business  A port or border is defined as a place (seaport, collected data on trade flows for the most airport or land border crossing) where recent four-year period from international merchandise can enter or leave an economy. databases such as the United Nations  Government agencies considered relevant are Commodity Trade Statistics Database (UN agencies such as customs, port authorities, road Comtrade). For economies for which trade police, border guards, standardization agencies, flow data were not available, data from ministries or departments of agriculture or ancillary government sources (various industry, national security agencies and any ministries and departments) and World Bank other government authorities. Group country offices were used to identify the export product and natural trading partners.  A shipment is a unit of trade. Export shipments do not necessarily need to be containerized, while import shipments of auto parts are assumed to be containerized. Doing Business 2016 Maldives 67 TRADING ACROSS BORDERS Where does the economy stand today? The Trading across Border indicator refers to a case Globally, Maldives stands at 137 in the ranking of 189 study scenario of a warehouse in the largest business city economies on the ease of trading across borders (figure of an economy (except for 11 economies for which the 9.1). data are a population-weighted average of the 2 largest While not included in the distance to frontier or ease of business cities) trading with the main import and export doing business ranking, data on domestic transportation partner through the economy’s main border crossing. is also recorded for all economies and provided in Table 9.3. Figure 9.1 How Maldives and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2016 Maldives 68 TRADING ACROSS BORDERS What are the details? The indicators reported here for Maldives are based LOCATION OF STANDARDIZED COMPANY on a set of specific predefined procedures for trading a shipment of goods by the most widely used mode of transport (whether sea, land, air or some City: Malé combination of these). The information on the time and cost to complete export and import is collected The details on the predefined set of procedures, and the from local freight forwarders, customs brokers and associated time and cost, for exporting and importing a traders. shipment of goods are listed in the summary bellow, along with the required documents. Table 9.2 Summary of export and import time and cost for trading across borders in Maldives Maldives South Asia Time to export: Border compliance (hours) 42 61 Cost to export: Border compliance (USD) 596 376 Time to export: Documentary compliance (hours) 48 80 Cost to export: Documentary compliance (USD) 300 184 Time to import: Border compliance (hours) 100 114 Cost to import: Border compliance (USD) 981 653 Time to import: Documentary compliance (hours) 61 108 Cost to import: Documentary compliance (USD) 180 349 Source: Doing Business database. Table 9.3 Summary of trading details, transport time and documents for trading across borders in Maldives Export Import HS 03 : Fish & crustacean, HS 8708: Parts and accessories Product mollusc & other aquatic of motor vehicles invertebrate Trade partner Thailand Singapore Border Male port Male port Distance (km) 1 1 Domestic transport time (hours) 2 3 Domestic transport cost (USD) 165 161 Domestic transport speed (km/hour) 0.7 0.4 Domestic transport cost per distance (USD/km) 165.0 161.1 Doing Business 2016 Maldives 69 Source: Doing Business database. Note: Although Doing Business collects and publishes data on the time and cost for domestic transport, it does not use these data in calculating the distance to frontier score for trading across borders or the ranking on the ease of trading across borders. Documents to export Bill of lading Cargo release order Commercial Invoice Export declaration Export license Health certificate Packing list Documents to import Bill of lading Commercial invoice Delivery order Health Check form Import declaration Import license Packing list Security check form Source: Doing Business database. Note: Doing Business continues to collect data on the number of documents needed to trade internationally. Unlike in previous years, however, these data are excluded from the calculation of the distance to frontier score and ranking. The time and cost for documentary compliance serve as better measures of the overall cost and complexity of compliance with documentary requirements than does the number of documents required. Doing Business 2016 Maldives 70 Figure 9.2 Summary of Maldives on the ease of trading across borders Export Import Source: Doing Business database. Doing Business 2016 Maldives 71 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent courts encourage new business relationships because Time required to enforce a contract through businesses know they can rely on the courts if a new the courts (calendar days) customer fails to pay. Speedy trials are essential for Time to file and serve the case small enterprises, which may lack the resources to Time for trial and to obtain the judgment stay in business while awaiting the outcome of a long court dispute. Time to enforce the judgment What do the indicators cover? Cost required to enforce a contract through the courts (% of claim) Doing Business measures the time and cost for resolving a standardized commercial dispute through Attorney fees a local first-instance court. In addition, this year it Court fees introduces a new measure, the quality of judicial Enforcement fees processes index, evaluating whether each economy has adopted a series of good practices that promote Quality of judicial processes index (0-18) quality and efficiency in the court system. This new Court structure and proceedings (0-5) index replaces the indicator on procedures, which was eliminated this year. The ranking of economies Case management (0-6) on the ease of enforcing contracts is determined by Court automation (0-4) sorting their distance to frontier scores. These scores Alternative dispute resolution (0-3) are the simple average of the distance to frontier scores for each of the component indicators. The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The  The value of the dispute is 200% of the case study assumes that the court hears an expert on income per capita or the equivalent in local the quality of the goods in dispute. This distinguishes currency of USD 5,000, whichever is greater. the case from simple debt enforcement. To make the  The seller sues the buyer before the court data comparable across economies, Doing Business with jurisdiction over commercial cases worth uses several assumptions about the case: 200% of income per capita or $5,000.  The dispute concerns a lawful transaction  The seller requests a pretrial attachment to between two businesses (Seller and Buyer), secure the claim. both located in the economy’s largest  The dispute on the quality of the goods business city. For 11 economies the data requires an expert opinion. are also collected for the second largest business city.  The judge decides in favor of the seller; there is no appeal.  The buyer orders custom-made goods, then fails to pay.  The seller enforces the judgment through a public sale of the buyer’s movable assets. Doing Business 2016 Maldives 72 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial frontier and ease of doing business ranking at the end of dispute through the courts in Maldives? According to this profile for more details. data collected by Doing Business, contract enforcement Globally, Maldives stands at 95 in the ranking of 189 takes 665.00 days and costs 16.50% of the value of the economies on the ease of enforcing contracts (figure claim. Most indicator sets refer to the largest business 10.1). The rankings for comparator economies and the city of an economy, except for 11 economies for which regional average ranking provide other useful the data are a population-weighted average of the 2 benchmarks for assessing the efficiency of contract largest business cities. See the chapter on distance to enforcement in Maldives. Figure 10.1 How Maldives and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2016 Maldives 73 ENFORCING CONTRACTS What are the details? The data on time and cost reported here for ECONOMY DETAILS Maldives are built by following the step-by-step evolution of a commercial sale dispute within the court, under the assumptions about the case Male' Civil Court, described above (figure 10.2). The time and cost of Court name: Commercial Branch resolving the standardized dispute are identified through study of the codes of civil procedure and City: Malé other court regulations, as well as through questionnaires completed by local litigation lawyers (and, in a quarter of the economies covered by Doing Business, by judges as well). Figure 10.2 Time and cost of contract enforcement in Maldives and comparator economies Source: Doing Business database. Doing Business 2016 Maldives 74 Table 10.2 Details on time and cost for enforcing contracts in Maldives South Asia Indicator Maldives average Time (days) 665 1,077 Filing and service 30 Trial and judgment 165 Enforcement of judgment 470 Cost (% of claim) 16.5 30.5 Attorney fees (% of claim) 16.4 Court fees (% of claim) 0.1 Enforcement fees (% of claim) 0.0 Source: Doing Business database. Doing Business 2016 Maldives 75 ENFORCING CONTRACTS Quality of judicial processes index The quality of judicial processes index measures The scores reported here show which of these good whether each economy has adopted a series of good practices are available in Maldives. practices in its court system in four areas: court This methodology was initially developed by Djankov and structure and proceedings, case management, court others (2003) and is adopted here with several changes. automation and alternative dispute resolution. The The quality of judicial processes index was introduced in score on the quality of judicial processes index is the Doing Business 2016. The good practices tested in this sum of the scores on these 4 sub-components. The index were developed on the basis of internationally index ranges from 0 to 18, with higher values recognized good practices promoting judicial efficiency. indicating more efficient judicial processes. Figure 10.3 Quality of judicial processes index in Maldives and comparator economies Source: Doing Business database. Doing Business 2016 Maldives 76 Table 10.3 Details of the quality of judicial processes index in Maldives Answer Score Quality of judicial processes index (0-18) 6.50 Court structure and proceedings (0-5) 4.0 1. Is there a court or division of a court dedicated solely to hearing Yes 1.5 commercial cases? 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small Yes claims? 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? No 0 Case management (0-6) 0.0 1. Time standards 0.0 1.a. Are there laws setting overall time standards for key court events in Yes a civil case? 1.b. If yes, are the time standards set for at least three court events? No 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that No can be granted? 2.b. Are adjournments limited to unforeseen and exceptional No circumstances? 2.c. If rules on adjournments exist, are they respected in more than 50% n.a. of cases? 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) clearance rate report; No 0.0 (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques No 0.0 used before the competent court? 5. Are there any electronic case management tools in place within the No 0.0 competent court for use by judges? 6. Are there any electronic case management tools in place within the No 0.0 competent court for use by lawyers? Court automation (0-4) 1.0 Doing Business 2016 Maldives 77 Answer Score 1. Can the initial complaint be filed electronically through a dedicated No 0.0 platform within the competent court? 2. Is it possible to carry out service of process electronically for claims No 0.0 filed before the competent court? 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 1.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public through publication in official gazettes, Yes in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made available to the general public through Yes publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 1.5 1. Arbitration 1.0 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or section of the applicable code of civil Yes procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy—that cannot be submitted to Yes arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the Yes courts? 2. Mediation/Conciliation 0.5 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or section of the applicable code of civil No procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or conciliation is successful, a refund of No court filing fees, income tax credits or the like)? Source: Doing Business database. Doing Business 2016 Maldives 78 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By clarifying the expectations of creditors and debtors about the outcome of insolvency Appeals and requests for extension are proceedings, well-functioning insolvency systems can included facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and sustainably grow the economy. estate) What do the indicators cover? Measured as percentage of estate value Doing Business studies the time, cost and outcome of Court fees insolvency proceedings involving domestic legal Fees of insolvency administrators entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Lawyers’ fees dollar recovered by secured creditors through Assessors’ and auctioneers’ fees reorganization, liquidation or debt enforcement Other related fees (foreclosure or receivership) proceedings. To determine the present value of the amount Outcome recovered by creditors, Doing Business uses the Whether business continues operating as a lending rates from the International Monetary Fund, going concern or business assets are sold supplemented with data from central banks and the piecemeal Economist Intelligence Unit. Recovery rate for creditors In addition, Doing Business evaluates the adequacy Measures the cents on the dollar recovered and integrity of the existing legal framework by secured creditors applicable to liquidation and reorganization proceedings through the strength of insolvency Outcome for the business (survival or not) framework index. The index tests whether economies determines the maximum value that can be adopted internationally accepted good practices in recovered four areas: commencement of proceedings, Official costs of the insolvency proceedings management of debtor’s assets, reorganization are deducted proceedings and creditor participation. Depreciation of furniture is taken into The ranking of economies on the ease of resolving account insolvency is determined by sorting their distance to Present value of debt recovered frontier scores for resolving insolvency. These scores are the simple average of the distance to frontier Strength of insolvency framework index (0- scores for the recovery rate and the strength of 16) insolvency framework index. The Resolving Sum of the scores of four component indices: Insolvency indicators do not measure insolvency Commencement of proceedings index (0-3) proceedings of individuals and financial institutions. The data are derived from questionnaire responses Management of debtor’s assets index (0-6) by local insolvency practitioners and verified through Reorganization proceedings index (0-3) a study of laws and regulations as well as public information on bankruptcy systems. Creditor participation index (0-4) Doing Business 2016 Maldives 79 RESOLVING INSOLVENCY Where does the economy stand today? According to data collected by Doing Business, resolving The resolving insolvency indicators are based on detailed insolvency takes 1.50 years on average and costs 4.00% information collected through questionnaires completed of the debtor’s estate, with the most likely outcome by insolvency experts, including lawyers, practitioners being that the company will be sold as piecemeal sale. (administrators, trustees), accountants and judges. Data The average recovery rate is 49.70 cents on the dollar. on the time, cost and outcome refer to the most likely in- Most indicator sets refer to a case scenario in the largest court insolvency procedure applicable under specific business city of an economy, except for 11 economies for case study assumptions. Data on provisions applicable to which the data are a population-weighted average of the judicial liquidation and reorganization is based on the 2 largest business cities. current law governing insolvency proceedings in each Globally, Maldives stands at 135 in the ranking of 189 economy. economies on the ease of resolving insolvency (figure 11.1). Figure 11.1 How Maldives and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2016 Maldives 80 Figure 11.2 Efficiency of proceedings - time, cost and recovery rate in Maldives and comparator economies. Source: Doing Business database. Note: The recovery rate is calculated based on the time, cost and outcome of insolvency proceedings involving domestic legal entities and is recorded as cents on the dollar recovered by secured creditors. The calculation takes into account the outcome: whether the business emerges from the proceedings as a going concern or the assets are sold piecemeal. Then the costs of the proceedings are deducted. Finally, the value lost as a result of the time the money remains tied up in insolvency proceedings is taken into account. The recovery rate is the present value of the remaining proceeds, based on end-2014 lending rates. Doing Business 2016 Maldives 81 Table 11.1 Details of data on efficiency of insolvency proceedings in Maldives Indicator Answer Explanation After Mirage's default on payment, BizBank would initiate foreclosure by filing the petition at the Civil Court and Registrar of Companies. This is the most Proceedin foreclosure effective way for BizBank to recover its investment with the security interest over g Mirage's assets. After Court's decision on Mirage's case, BizBank would gain possession of Outcome piecemeal sale Mirage's assets and sell them piecemeal in a public auction. The hotel will stop operating. Time (in The foreclosure procedure until BizBank is repaid some or all of the money owed 1.5 years) to it takes approximate 1.5 years. Cost (% of The costs associated with the case would amount to approximately 4% of the 4.0 estate) value of the debtor's estate. Main component of the cost is the attorney fee. Recovery rate: 49.70 Source: Doing Business database. Doing Business 2016 Maldives 82 RESOLVING INSOLVENCY Strength of resolving insolvency index The strength of insolvency framework index is the with higher values indicating insolvency legislation that is sum of the scores on the commencement of better designed for rehabilitating viable firms and proceedings index, management of debtor’s assets liquidating nonviable ones. Maldives’s score on the index, reorganization proceedings index and creditor strength of insolvency framework index is 2.00 out of 16. participation index. The index ranges from 0 to 16, Figure 11.3 Strength of insolvency framework index (0-16) in Maldives and comparator economies Source: Doing Business database. Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice”. Doing Business 2016 Maldives 83 Table 11.3 Summary of data for the strength of insolvency framework index in Maldives Answer Score Strength of insolvency framework index (0-16) 2.00 Commencement of proceedings index (0-3) 2.00 (b) Debtor may What procedures are available to a DEBTOR when commencing insolvency file for liquidation 0.5 proceedings? only (b) Yes, but a Does the insolvency framework allow a CREDITOR to file for insolvency of creditor may file 0.5 the debtor? for liquidation only (a) Debtor is What basis for commencement of the insolvency proceedings is allowed generally unable 1.0 under the insolvency framework? to pay its debts as they mature Management of debtor's assets index (0-6) 0.00 Does the insolvency framework allow the continuation of contracts No 0.0 supplying essential goods and services to the debtor? Does the insolvency framework allow the rejection by the debtor of overly No 0.0 burdensome contracts? Does the insolvency framework allow avoidance of preferential No 0.0 transactions? Does the insolvency framework allow avoidance of undervalued No 0.0 transactions? Does the insolvency framework provide for the possibility of the debtor No 0.0 obtaining credit after commencement of insolvency proceedings? (c) No priority is Does the insolvency framework assign priority to post-commencement assigned to post- 0.0 credit? commencement creditors Reorganization proceedings index (0-3) 0.00 Which creditors vote on the proposed reorganization plan? N/A 0.0 Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as what they would obtain in a No 0.0 liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote separately and are creditors in No 0.0 the same class treated equally? Creditor participation index (0-4) 0.00 Doing Business 2016 Maldives 84 Answer Score Does the insolvency framework require approval by the creditors for No 0.0 selection or appointment of the insolvency representative? Does the insolvency framework require approval by the creditors for sale No 0.0 of substantial assets of the debtor? Does the insolvency framework provide that a creditor has the right to No 0.0 request information from the insolvency representative? Does the insolvency framework provide that a creditor has the right to No 0.0 object to decisions accepting or rejecting creditors' claims? Source: Doing Business database. Doing Business 2016 Maldives 85 LABOR MARKET REGULATION Doing Business has historically studied the flexibility of regulations as well as secondary sources are reviewed to regulation of employment, specifically as it relates to the ensure accuracy. areas of hiring, working hours and redundancy. This year Doing Business has expanded the scope of the labor To make the data comparable across economies, several market regulation indicators by adding 16 new assumptions about the worker and the business are questions, most of which focus on measuring job quality. used. Over the period from 2007 to 2011 improvements were The worker: made to align the methodology for the labor market  Is a cashier in a supermarket or grocery store, regulation indicators (formerly the employing workers age 19, with one year of work experience. indicators) with the letter and spirit of the International  Is a full-time employee. Labour Organization (ILO) conventions. Ten of the 189  Is not a member of the labor union, unless ILO conventions cover areas now measured by Doing membership is mandatory. Business (up from four previously): employee The business: termination, weekend work, holiday with pay, night work,  Is a limited liability company (or the equivalent protection against unemployment, sickness benefits, in the economy). maternity protection, working hours, equal remuneration  Operates a supermarket or grocery store in the and labor inspections. economy’s largest business city. For 11 economies the data are also collected for the Between 2009 and 2011 the World Bank Group worked second largest business city. with a consultative group—including labor lawyers,  Has 60 employees. employer and employee representatives, and experts  Is subject to collective bargaining agreements if from the ILO, the Organisation for Economic Co- such agreements cover more than 50% of the operation and Development (OECD), civil society and the food retail sector and they apply even to firms private sector—to review the methodology for the labor that are not party to them. market regulation indicators and explore future areas of  Abides by every law and regulation but does not research. grant workers more benefits than those mandated by law, regulation or (if applicable) A full report with the conclusions of the consultative collective bargaining agreements. group, along with the methodology it proposed, is available on the Doing Business website at: http://www.doingbusiness.org/methodology/labor- market-regulation. Doing Business 2016 presents the data for the labor market regulation indicators in an annex. The report does not present rankings of economies on these indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business. Detailed data collected on labor market regulation are available on the Doing Business website (http://www.doingbusiness.org). The data on labor market regulation are based on a detailed questionnaire on employment regulations that is completed by local lawyers and public officials. Employment laws and Doing Business 2016 Maldives 86 LABOR MARKET REGULATION What are the details? The data reported here for Maldives are based on a Employment laws and regulations as well as secondary detailed survey of labor market regulation that is sources are reviewed to ensure accuracy. completed by local lawyers and public officials. Hiring Data on hiring cover five areas: (i) whether fixed-term wage to the average value added per worker (the ratio of contracts are prohibited for permanent tasks; (ii) the an economy’s GNI per capita to the working-age maximum cumulative duration of fixed-term contracts; population as a percentage of the total population), and (iii) the minimum wage for a cashier, age 19, with one (v) the availability of incentives for employers to hire year of work experience; (iv) the ratio of the minimum employees under the age of 25*. Hiring Data Fixed-term contracts prohibited for permanent tasks? No 24 months (Article 13.g of the new Maximum length of a single fixed-term contract (months) Employment Act 2008) Maximum length of fixed-term contracts, including renewals (months) 24.0 Minimum wage applicable to the worker assumed in the case study 0.0 (US$/month) Ratio of minimum wage to value added per worker 0.0 Incentives for employing workers under age 25? No Source: Doing Business database. *A new question introduced in the Doing Business 2016 report for the first time. Doing Business 2016 Maldives 87 LABOR MARKET REGULATION Working hours Data on working hours cover nine areas: i) the maximum and nonnursing women can work the same night hours number of working days allowed per week; (ii) the as men*; (vii) whether there are restrictions on weekly premium for night work (as a percentage of hourly pay); holiday work; (viii) whether there are restrictions on (iii) the premium for work on a weekly rest day (as a overtime work*; and (ix) the average paid annual leave percentage of hourly pay); (iv) the premium for overtime for workers with 1 year of tenure, 5 years of tenure, and work (as a percentage of hourly pay)*; (v) whether there 10 years of tenure. are restrictions on night work; (vi) whether nonpregnant Working Hours Data Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 0.0 Premium for work on weekly rest day (% of hourly pay) 50.0 Premium for overtime work (% of hourly pay) 25.0 Restrictions on night work? 0.0 Whether nonpregnant and nonnursing women can work the same night Yes hours as men Restrictions on weekly holiday? 0.0 Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 30.0 Paid annual leave for a worker with 5 years of tenure (working days) 30.0 Paid annual leave for a worker with 10 years of tenure (working days) 30.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 30.0 working days) Source: Doing Business database. *A new question introduced in the Doing Business 2016 report for the first time. Doing Business 2016 Maldives 88 LABOR MARKET REGULATION Redundancy rules Data on redundancy cover nine areas: (i) the length of whether the employer needs approval from a third party the maximum probationary period (in months) for to terminate one redundant worker; (vi) whether the permanent employees; (ii) whether redundancy is employer needs approval from a third party to terminate allowed as a basis for terminating workers; (iii) whether a group of nine redundant workers; (vii) whether the law the employer needs to notify a third party (such as a requires the employer to reassign or retrain a worker government agency) to terminate one redundant worker; before making the worker redundant; (viii) whether (iv) whether the employer needs to notify a third party to priority rules apply for redundancies; and (ix) whether terminate a group of nine redundant workers; (v) priority rules apply for reemployment. Redundancy rules Data Maximum length of probationary period (months) 3.0 Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? No Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Source: Doing Business database. Doing Business 2016 Maldives 89 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice severance payments applicable to a worker with 1 year of requirements and severance payments due when tenure, a worker with 5 years and a worker with 10 years terminating a redundant worker, expressed in weeks of is considered. One month is recorded as 4 and 1/3 salary. The average value of notice requirements and weeks. Redundancy cost indicator (in salary weeks) Data Notice period for redundancy dismissal for a worker with 1 year of tenure 4.3 Notice period for redundancy dismissal for a worker with 5 years of tenure 8.7 Notice period for redundancy dismissal for a worker with 10 years of tenure 8.7 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 7.2 of tenure) Severance pay for redundancy dismissal for a worker with 1 year of tenure 0.0 Severance pay for redundancy dismissal for a worker with 5 years of tenure 0.0 Severance pay for redundancy dismissal for a worker with 10 years of tenure 0.0 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 0.0 of tenure) Source: Doing Business database. Doing Business 2016 Maldives 90 LABOR MARKET REGULATION Job quality Doing Business 2016 report presents, for the first time, on-the-job training at no cost to the employee; (viii) data on 12 job quality areas: (i) whether the law whether a worker is eligible for an unemployment mandates equal remuneration for work of equal value; protection scheme after one year of service; (ix) the (ii) whether the law mandates nondiscrimination based minimum duration of the contribution period (in months) on gender in hiring, (iii) whether the law mandates paid required for unemployment protection; (x) whether an or unpaid maternity leave; (iv) the minimum length of employee can create or join a union; (xi) the availability maternity leave in calendar days (minimum number of of administrative or judicial relief in case of infringement days that legally have to be paid by the government, the of employees’ rights; and (xii) the availability of a labor employer or both); (v) whether employees on maternity inspection system. If no maternity leave is mandated by leave receive 100 % of wages; (vi) the availability of five law, parental leave is measured if applicable. fully paid days of sick leave a year; (vii) the availability of Job Quality Data Equal remuneration for work of equal value? No Gender nondiscrimination in hiring? Yes Paid or unpaid maternity leave mandated by law? Yes Minimum length of maternity leave (calendar days)? 60.0 Receive 100% of wages on maternity leave? Yes Five fully paid days of sick leave a year? Yes On-the-job training? No Unemployment protection after one year of employment? No Minimum contribution period for unemployment protection (months)? n.a. Can employee create or join union? Yes Administrative or judicial relief for infringement of employees' rights? Yes Labor inspection system? Yes Source: Doing Business database. Doing Business 2016 Maldives 91 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING Doing Business presents results for two aggregate even though it is no longer at the frontier in a measures: the distance to frontier score and the ease of subsequent year. doing business ranking, which is based on the distance For scores such as those on the strength of legal rights to frontier score. The ease of doing business ranking index or the quality of land administration index, the compares economies with one another; the distance to frontier is set at the highest possible value. For the total frontier score benchmarks economies with respect to tax rate, consistent with the use of a threshold in regulatory best practice, showing the absolute distance calculating the rankings on this indicator, the frontier is to the best performance on each Doing Business defined as the total tax rate at the 15th percentile of the indicator. When compared across years, the distance to overall distribution for all years included in the analysis frontier score shows how much the regulatory up to and including Doing Business 2015. For the time to environment for local entrepreneurs in an economy has pay taxes the frontier is defined as the lowest time changed over time in absolute terms, while the ease of recorded among all economies that levy the three major doing business ranking can show only how much the taxes: profit tax, labor taxes and mandatory regulatory environment has changed relative to that in contributions, and value added tax (VAT) or sales tax. For other economies. the different times to trade across borders, the frontier is Distance to Frontier defined as 1 hour even though in many economies the time is less than that. The distance to frontier score captures the gap between an economy’s performance and a measure of best In the same formulation, to mitigate the effects of practice across the entire sample of 36 indicators for 10 extreme outliers in the distributions of the rescaled data Doing Business topics (the labor market regulation for most component indicators (very few economies indicators are excluded). For starting a business, for need 700 days to complete the procedures to start a example, the former Yugoslav Republic of Macedonia business, but many need 9 days), the worst performance and New Zealand have the smallest number of is calculated after the removal of outliers. The definition procedures required (1), and New Zealand the shortest of outliers is based on the distribution for each time to fulfill them (0.5 days). Slovenia has the lowest component indicator. To simplify the process two rules cost (0.0), and Australia, Colombia and 103 other were defined: the 95th percentile is used for the economies have no paid-in minimum capital indicators with the most dispersed distributions requirement (table 14.1 in the Doing Business 2016 (including minimum capital, number of payments to pay report). taxes, and the time and cost indicators), and the 99th percentile is used for number of procedures. No outlier is Calculation of the distance to frontier score removed for component indicators bound by definition Calculating the distance to frontier score for each or construction, including legal index scores (such as the economy involves two main steps. In the first step depth of credit information index, extent of conflict of individual component indicators are normalized to a interest regulation index and strength of insolvency common unit where each of the 36 component framework index) and the recovery rate (figure 14.1). indicators y (except for the total tax rate) is rescaled In the second step for calculating the distance to frontier using the linear transformation (worst − y)/(worst − score, the scores obtained for individual indicators for frontier). In this formulation the frontier represents the each economy are aggregated through simple averaging best performance on the indicator across all economies into one distance to frontier score, first for each topic since 2005 or the third year in which data for the and then across all 10 topics: starting a business, dealing indicator were collected. Both the best performance and with construction permits, getting electricity, registering the worst performance are established every five years property, getting credit, protecting minority investors, based on the Doing Business data for the year in which paying taxes, trading across borders, enforcing contracts they are established, and remain at that level for the five and resolving insolvency. More complex aggregation years regardless of any changes in data in interim years. methods—such as principal components and Thus an economy may set the frontier for an indicator unobserved components—yield a ranking nearly Doing Business 2016 Maldives 92 identical to the simple average used by Doing Business . The nonlinear transformation is not based on any 4 Thus Doing Business uses the simplest method: economic theory of an “optimal tax rate” that minimizes weighting all topics equally and, within each topic, giving distortions or maximizes efficiency in an economy’s equal weight to each of the topic components . overall tax system. Instead, it is mainly empirical in 5 nature. The nonlinear transformation along with the An economy’s distance to frontier score is indicated on a threshold reduces the bias in the indicator toward scale from 0 to 100, where 0 represents the worst economies that do not need to levy significant taxes on performance and 100 the frontier. All distance to frontier companies like the Doing Business standardized case calculations are based on a maximum of five decimals. study company because they raise public revenue in However, indicator ranking calculations and the ease of other ways—for example, through taxes on foreign doing business ranking calculations are based on two companies, through taxes on sectors other than decimals. manufacturing or from natural resources (all of which are The difference between an economy’s distance to outside the scope of the methodology). In addition, it frontier score in any previous year and its score in 2015 acknowledges the need of economies to collect taxes illustrates the extent to which the economy has closed from firms. the gap to the regulatory frontier over time. And in any Calculation of scores for economies with 2 cities given year the score measures how far an economy is covered from the best performance at that time. For each of the 11 economies in which Doing Business Treatment of the total tax rate collects data for the second largest business city as well The total tax rate component of the paying taxes as the largest one, the distance to frontier score is indicator set enters the distance to frontier calculation in calculated as the population-weighted average of the a different way than any other indicator. The distance to distance to frontier scores for these two cities (table frontier score obtained for the total tax rate is 13.1). This is done for the aggregate score, the scores for transformed in a nonlinear fashion before it enters the each topic and the scores for all the component distance to frontier score for paying taxes. As a result of indicators for each topic. the nonlinear transformation, an increase in the total tax rate has a smaller impact on the distance to frontier score for the total tax rate—and therefore on the distance to frontier score for paying taxes—for economies with a below-average total tax rate than it would have had before this approach was adopted in Doing Business 2015 (line B is smaller than line A in figure 14.2 of the Doing Business 2016 report). And for economies with an extreme total tax rate (a rate that is very high relative to the average), an increase has a greater impact on both these distance to frontier scores than it would have had before (line D is bigger than line C in figure 14.2 of the Doing Business 2016 report). 4 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 5 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. Indicators for all other topics are assigned equal weights Doing Business 2016 Maldives 93 Table 13.1 Weights used in calculating the distance to implemented regulatory reforms making it easier to do frontier scores for economies with 2 cities covered business in 3 or more of the 10 topics included in this year’s aggregate distance to frontier score. Changes Economy City Weight (%) making it more difficult to do business are subtracted Dhaka 78 Bangladesh from the total number of those making it easier to do Chittagong 22 São Paulo 61 business. Twenty-four economies meet this criterion: Brazil Armenia; Azerbaijan; Benin; Costa Rica; Côte d’Ivoire; Rio de Janeiro 39 Shanghai 55 Cyprus; Hong Kong SAR, China; Indonesia; Jamaica; China Beijing 45 Kazakhstan; Kenya; Lithuania; Madagascar; Mauritania; Mumbai 47 Morocco; Romania; the Russian Federation; Rwanda; India Delhi 53 Senegal; Togo; Uganda; the United Arab Emirates; Jakarta 78 Uzbekistan; and Vietnam. Second, Doing Business sorts Indonesia Surabaya 22 these economies on the increase in their distance to Tokyo 65 Japan frontier score from the previous year using comparable Osaka 35 data. Mexico City 83 Mexico Monterrey 17 Selecting the economies that implemented regulatory Lagos 77 reforms in at least three topics and had the biggest Nigeria Kano 23 improvements in their distance to frontier scores is Karachi 65 intended to highlight economies with ongoing, broad- Pakistan Lahore 35 based reform programs. The improvement in the Moscow 70 Russian Federation distance to frontier score is used to identify the top St. Petersburg 30 New York 60 improvers because this allows a focus on the absolute United States improvement—in contrast with the relative improvement Los Angeles 40 Source: United Nations, Department of Economic and Social shown by a change in rankings—that economies have Affairs, Population Division, World Urbanization Prospects, made in their regulatory environment for business. 2014 Revision. http://esa.un.org/unpd/wup/CD- ROM/Default.aspx. Ease of Doing Business ranking Economies that improved the most across 3 or more Doing Business topics in 2014/15 The ease of doing business ranking ranges from 1 to 189. The ranking of economies is determined by sorting the Doing Business 2016 uses a simple method to calculate aggregate distance to frontier scores, rounded to 2 which economies improved the ease of doing business decimals. the most. First, it selects the economies that in 2014/15 Doing Business 2016 Maldives 94 Doing Business 2016 Maldives 95 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 189 Contributors http://www.doingbusiness.org/rankings More than 11,400 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 136 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, case studies and repreneurship customized economy and regional profiles http://www.doingbusiness.org/reports Distance to frontier Data benchmarking 189 economies to the frontier Methodology in regulatory practice and a distance to frontier The methodologies and research papers underlying calculator Doing Business http://www.doingbusiness.org/data/distance-to- http://www.doingbusiness.org/methodology frontier Research Information on good practices Abstracts of papers on Doing Business topics and Showing where the many good practices identified related policy issues by Doing Business have been adopted http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice Doing Business reforms Short summaries of DB2016 business regulation reforms and lists of reforms since DB2008 http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2016 Maldives 96