45709 Country Profile for Belarus © 2008 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 e-mail feedback@worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of the World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. 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For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank 1818 H Street NW Washington, DC 20433, USA fax: 202-522-2422 e-mail: pubrights@worldbank.org Additional copies of Doing Business 2009, Doing Business 2008, Doing Business 2007 : How to Reform, Doing Business in 2006 : Creating Jobs, Doing Business in 2005 : Removing Obstacles to Growth and Doing Business in 2004 : Understanding Regulations may be purchased at www.doingbusiness.org ISBN: 978-0-8213-7609-6 E-ISBN: 978-0-8213-7610-2 DOI: 10.1596/978-0-8213-7609-6 Current features News on the Doing Business project www.doingbusiness.org Rankings How economies rank-from 1 to 181 www.doingbusiness.org/economyrankings Reformers Contents Short summaries of DB2009 reforms, lists of reformers since DB2004 and a ranking simulation tool www.doingbusiness.org/reformers Introduction 1 and Aggregate Rankings Data time series Customized data sets since DB2004 Starting a Business 5 www.doingbusiness.org/customquery Dealing with 10 Methodology and research Construction Permits The methodologies and research papers underlying Doing Business www.doingbusiness.org/MethodologySurveys Employing Workers 15 Blog Registering Property 19 Online journal focusing on business regulation reform http://blog.doingbusiness.org Getting Credit 24 Downloads Doing Business reports as well as subnational, country and regional Protecting Investors 28 reports and case studies www.doingbusiness.org/downloads Paying Taxes 32 Subnational projects Trading across Borders 36 Differences in business regulations at the subnational level www.doingbusiness.org/subnational Enforcing Contracts 40 Law library Closing a Business 44 Online collection of business laws and regulations www.doingbusiness.org/lawlibrary DB2009 Reforms 48 Local partners More than 6,700 specialists in 181 economies who participate www.doingbusiness.org/LocalPartners Reformers' Club Celebrating the top 10 Doing Business reformers www.reformersclub.org Business Planet Interactive map on the ease of doing business http://www.doingbusiness.org/map Doing Business 2009 is the sixth in a series of annual reports investigating regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 181 economies, from Afghanistan to Zimbabwe, over time. A set of regulations affecting 10 stages of a business's life are measured : starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2009 are current as of June 1, 2008*. The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why. The Doing Business methodology has limitations. Other areas important to business such as an economy's proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions, are not studied directly by Doing Business. To make the data comparable across economies, the indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policymakers in designing reform. The data set covers 181 economies: 46 in Sub-Saharan Africa, 32 in Latin America and The Caribbean, 25 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 19 in the Middle East and North Africa and 8 in South Asia, as well as 27 OECD high-income economies as benchmarks. The following pages present the summary Doing Business indicators for Belarus. The data used for this country profile come from the Doing Business database and are summarized in graphs. These graphs allow a comparison of the economies in each region not only with one another but also with the "good practice" economy for each indicator. The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good-practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10. More information is available in the full report. Doing Business 2009 presents the indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with information on ordering the report, are available on the Doing Business website (www.doingbusiness.org). * Except for the Paying Taxes indicator that refers to the period January to December of 2007. 1 Economy Rankings - Ease of Doing Business Belarus is ranked 85 out of 181 economies. Singapore is the top ranked economy in the Ease of Doing Business. Belarus - Compared to global good practice economy as well as selected economies: Belarus's ranking in Doing Business 2009 Rank Doing Business 2009 Ease of Doing Business 85 Starting a Business 97 Dealing with Construction Permits 65 Employing Workers 49 Registering Property 14 Getting Credit 109 Protecting Investors 104 Paying Taxes 181 Trading Across Borders 134 Enforcing Contracts 14 2 Closing a Business 71 Summary of Indicators - Belarus Starting a Business Procedures (number) 8 Duration (days) 31 Cost (% GNI per capita) 7.8 Paid in Min. Capital (% of GNI per capita) 12.4 Dealing with Construction Permits Procedures (number) 17 Duration (days) 210 Cost (% of income per capita) 39.2 Employing Workers Difficulty of Hiring Index 0 Rigidity of Hours Index 40 Difficulty of Firing Index 40 Rigidity of Employment Index 27 Firing costs (weeks of salary) 22 Registering Property Procedures (number) 4 Duration (days) 21 Cost (% of property value) 0.0 Getting Credit Legal Rights Index 2 Credit Information Index 5 Public registry coverage (% adults) 2.4 Private bureau coverage (% adults) 0.0 Protecting Investors Disclosure Index 5 3 Protecting Investors Director Liability Index 1 Shareholder Suits Index 8 Investor Protection Index 4.7 Paying Taxes Payments (number) 112 Time (hours) 1188 Profit tax (%) 22.0 Labor tax and contributions (%) 39.6 Other taxes (%) 55.8 Total tax rate (% profit) 117.5 Trading Across Borders Documents for export (number) 8 Time for export (days) 20 Cost to export (US$ per container) 1772 Documents for import (number) 8 Time for import (days) 26 Cost to import (US$ per container) 1720 Enforcing Contracts Procedures (number) 28 Duration (days) 225 Cost (% of claim) 23.4 Closing a Business Time (years) 5.8 Cost (% of estate) 22 Recovery rate (cents on the dollar) 33.4 When entrepreneurs draw up a business plan and try to get under way, the first hurdles they face are the procedures required to incorporate and register the new firm before they can legally operate. Economies differ greatly in how they regulate the entry of new businesses. In some the process is straightforward and affordable. In others the procedures are so burdensome that entrepreneurs may have to bribe officials to speed the process or may decide to run their business informally. The data on starting a business is based on a survey and research investigating the procedures that a standard small to medium-size company needs to complete to start operations legally. These include obtaining all necessary permits and licenses and completing all required inscriptions, verifications and notifications with authorities to enable the company to formally operate. The time and cost required to complete each procedure under normal circumstances are calculated, as well as the minimum capital that must be paid in. It is assumed that all information is readily available to the entrepreneur, that there has been no prior contact with officials and that all government and nongovernment entities involved in the process function without corruption. To make the data comparable across economies, detailed assumptions about the type of business are used. Among these assumptions are the following: the business is a limited liability company conducting general commercial activities in the largest business city; it is 100% domestically owned, with a start-up capital of 10 times income per capita, a turnover of at least 100 times income per capita and between 10 and 50 employees; and it does not qualify for any special benefits, nor does it own real estate. Procedures are recorded only where interaction is required with an external party. It is assumed that the founders complete all procedures themselves unless professional services (such as by a notary or lawyer) are required by law. Voluntary procedures are not counted, nor are industry-specific requirements and utility hook-ups. Lawful shortcuts are counted. Cumbersome entry procedures are associated with more corruption, particularly in developing economies. Each procedure is a point of contact, a potential opportunity to extract a bribe. Analysis shows that burdensome entry regulations do not increase the quality of products, make work safer or reduce pollution. Instead, they constrain private investment; push more people into the informal economy; increase consumer prices and fuel corruption. 5 1. Historical data: Starting a Business in Belarus Starting a Business data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 121 97 Procedures (number) 16 10 8 Duration (days) 69 48 31 Cost (% GNI per capita) 26.1 8.8 7.8 Paid in Min. Capital (% of GNI per capita) 36.4 29.7 12.4 2. The following graphs illustrates the Starting a Business indicators in Belarus over the past 3 years: 6 3. Steps to Starting a Business in Belarus It requires 8 procedures, takes 31 days, and costs 7.78 % GNI per capita to start a business in Belarus. List of Procedures: 1. Obtain an approval of the company name with the Registry Office 2. Open a temporary bank account 3. Notarize documents and pay a registry fee 4. Business registration with the State Registry 5. Prepare a business seal 6. Obtain duplicates of company tax identification for opening bank account 7. Notarize signature card and seal 8. Open a regular bank account More detail is included in the appendix. 7 4. Benchmarking Starting a Business Regulations: Belarus is ranked 97 overall for Starting a Business. Ranking of Belarus in Starting a Business - Compared to good practice and selected economies: 8 The following table shows Starting a Business data for Belarus compared to good practice and comparator economies: Good Practice Procedures Duration Cost (% GNI Paid in Min. Economies (number) (days) per capita) Capital (% of GNI per capita) Denmark 0.0 New Zealand* 1 1 0.0 Selected Economy Belarus 8 31 7.8 12.4 Comparator Economies Kazakhstan 8 21 5.2 15.9 Kyrgyz Republic 4 15 7.4 0.4 Moldova 9 15 8.9 13.4 Russian Federation 8 29 2.6 2.2 Tajikistan 13 49 27.6 216.8 Ukraine 10 27 5.5 174.2 * The following economies are also good practice economies for : Procedures (number): Canada 9 Once entrepreneurs have registered a business, what regulations do they face in operating it? To measure such regulation, Doing Business focuses on the construction sector. Construction companies are under constant pressure; from government to comply with inspections and with licensing and safety regulations and from customers to be quick and cost-effective. These conflicting pressures point to the tradeoff in building regulation; the tradeoff between protecting people (construction workers, tenants, passersby) and keeping the cost of building affordable. Striking the right balance is a challenge when it comes to construction regulations. Good regulations ensure safety standards that protect the public while making the permitting process efficient, transparent and affordable for both building authorities and the private professionals who use it. If procedures are overly complicated or costly, builders build without a permit, leading to hazardous construction. The indicators on dealing with construction permits record all procedures officially required for an entrepreneur in the construction industry to build a warehouse. These include submitting project documents (building plans, site maps) to the authorities, obtaining all necessary licenses and permits, completing all required notifications and receiving all necessary inspections. They also include procedures for obtaining utility connections, such as electricity, telephone, water and sewerage. The time and cost to complete each procedure under normal circumstances are calculated. All official fees associated with legally completing the procedures are included (bribes not included). Time is recorded in calendar days. The survey assumes that the entrepreneur is aware of all existing regulations and does not use an intermediary to complete the procedures unless required to do so by law. To make the data comparable across economies, several assumptions about the business and its operations are used. The business is a small to medium-size limited liability company, located in the most populous city, domestically owned and operated, in the construction business, with 60 qualified employees. The warehouse to be built: · Is a new construction (there was no previous construction on the land). · Has 2 stories, both above ground, with a total surface of approximately 1,300.6 square meters (14,000 square feet). Each floor is 3 meters (9 feet, 10 inches) high · Has complete architectural and technical plans prepared by a licensed architect. · Will be connected to electricity, water, sewerage (sewage system, septic tank or their equivalent) and one land phone line. The connection to each utility network will be 32 feet, 10 inches (10 meters) long. · Will be used for general storage, such as of books or stationery. The warehouse will not be used for any goods requiring special conditions, such as food, chemicals or pharmaceuticals. · Will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements). Where the regulatory burden is large, entrepreneurs move their activity into the informal economy. There they operate with less concern for safety, leaving everyone worse off. 10 1. Historical data: Dealing with Construction Permits in Belarus Dealing with Construction Permits data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 93 65 Procedures (number) 17 17 17 Duration (days) 350 350 210 Cost (% of income per capita) 67.7 60.9 39.2 2. The following graphs illustrates the Dealing with Construction Permits indicators in Belarus over the past 3 years: 11 3. Steps to Building a Warehouse in Belarus It requires 17 procedures, takes 210 days, and costs 39.16 % GNI per capita to build a warehouse in Belarus. List of Procedures: 1. Obtain Decision from the Minsk City Executive 10. Apply for telephone connection Committee for elaboration of design documentation on sepcified land plot 11. Receive on-site inspection for telephone connection 2. Obtain state ecological expertise of design 12. Receive installation of telephone line documentation 13. Apply for water and sewerage connection 3. Obtain state expertise of design documentation 14. Receive on-site inspection and installation for water 4. Obtain approval of design documentation and sewerage connection (Architectural Plan Approval) 15. Receive installation of water and sewerage connection 5. Obtain the permit for building on specified land plot 16. Request inspection by the Acceptance Committee and 6. Obtain the building permit signature of acceptance act 7. Apply for electric power connection 17. Register the Building with Real Estate Registry 8. Obtain deeds of inspection and testing of engineering networks and systems of the structure for electricity connection 9. Receive connection to electricity 12 More detail is included in the appendix. 4. Benchmarking Dealing with Construction Permits Regulations: Belarus is ranked 65 overall for Dealing with Construction Permits. Ranking of Belarus in Dealing with Construction Permits - Compared to good practice and selected economies: * The following economies are also good practice economies for Building a Warehouse: Belize, New Zealand, St. Vincent and the Grenadines 13 The following table shows Dealing with Construction Permits data for Belarus compared to good practice and comparator economies: Good Practice Procedures Duration Cost (% of Economies (number) (days) income per capita) Denmark 6 Korea 34 Malaysia* 7.9 Selected Economy Belarus 17 210 39.2 Comparator Economies Kazakhstan 38 231 1431.8 Kyrgyz Republic 13 159 405.7 Moldova 30 292 142.2 Russian Federation 54 704 2612.7 Tajikistan 32 351 1420.7 Ukraine 30 471 1901.7 * The following economies are also good practice economies for : Cost (% of income per capita): Brunei, Palau, Qatar, St. Kitts and Nevis, Trinidad and Tobago, United Arab Emirates 14 Economies worldwide have established a system of laws and institutions intended to protect workers and guarantee a minimum standard of living for its population. This system generally encompasses four bodies of law: employment, industrial relations, social security and occupational health and safety laws. Doing Business examines government regulation in the area of employment. Two measures are presented: a rigidity of employment index and a firing cost measure. The rigidity of employment index is the average of three subindices: difficulty of hiring, rigidity of hours and difficulty of firing. Each index takes values between 0 and 100, with higher values indicating more rigid regulation. The difficulty of hiring index measures the flexibility of contracts and the ratio of the minimum wage to the value added per worker. The rigidity of hours index covers restrictions on weekend and night work, requirements relating to working time and the workweek, and mandated days of annual leave with pay. The difficulty of firing index covers workers' legal protections against dismissal, including the grounds permitted for dismissal and procedures for dismissal (individual and collective): notification and approval requirements, retraining or reassignment obligations and priority rules for dismissals and reemployment. The firing cost indicator measures the cost of advance notice requirements, severance payments and penalties due when terminating a redundant worker, expressed in weeks of salary. To make the data comparable across economies, a range of assumptions about the worker and the company are used. The company is assumed to be a limited liability manufacturing corporation that operates in the economy's most populous city, is 100% domestically owned and has 201 employees. The company is also assumed to be subject to collective bargaining agreements in economies where such agreements cover more than half the manufacturing sector and apply even to firms not party to them. Employment regulations are needed to allow efficient contracting between employers and workers and to protect workers from discriminatory or unfair treatment by employers. In its indicators on employing workers, Doing Business measures flexibility in the regulation of hiring, working hours and dismissal in a manner consistent with the conventions of the International Labour Organization (ILO). An economy can have the most flexible labor regulations as measured by Doing Business while ratifying and complying with all conventions directly relevant to the factors measured by Doing Business and with the ILO core labor standards. No economy can achieve a better score by failing to comply with these conventions. Governments all over the world face the challenge of finding the right balance between worker protection and labor market flexibility. But in developing countries especially, regulators often err to one extreme, pushing employers and workers into the informal sector. Analysis across economies shows that while employment regulation generally increases the tenure and wages of incumbent workers, overly rigid regulations may have undesirable side effects. These include less job creation, smaller company size, less investment in research and development, and longer spells of unemployment and thus the obsolescence of skills, all of which may reduce productivity growth. When economies err on the side of excessive rigidity, it is to the detriment of businesses and workers alike. 15 1. Historical data: Employing Workers in Belarus Employing Workers data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 48 49 Rigidity of Employment Index 27 27 27 Firing costs (weeks of salary) 22 22 22 2. The following graphs illustrates the Employing Workers indicators in Belarus over the past 3 years: 16 3. Benchmarking Employing Workers Regulations: Belarus is ranked 49 overall for Employing Workers. Ranking of Belarus in Employing Workers - Compared to good practice and selected economies: * The following economies are also good practice economies for Employing Workers: Marshall Islands, Singapore 17 The following table shows Employing Workers data for Belarus compared to good practice and comparator economies: Good Practice Rigidity of Firing costs Economies Employment (weeks of Index salary) Hong Kong, China* 0 New Zealand* 0 Selected Economy Belarus 27 22 Comparator Economies Kazakhstan 23 9 Kyrgyz Republic 38 17 Moldova 41 37 Russian Federation 44 17 Tajikistan 51 22 Ukraine 45 13 * The following economies are also good practice economies for : Rigidity of Employment Index: Maldives, Marshall Islands, Singapore, United States Firing costs (weeks of salary): Afghanistan, Denmark, Iraq, Marshall Islands, Micronesia, Palau, Puerto Rico, Tonga, United States 18 Formal property titles help promote the transfer of land, encourage investment and give entrepreneurs access to formal credit markets. But a large share of property in developing economies is not formally registered. Informal titles cannot be used as security in obtaining loans, which limits financing opportunities for businesses. Many governments have recognized this and started extensive property titling programs. But bringing assets into the formal sector is only part of the story. The more difficult and costly it is to formally transfer property, the greater the chances that formalized titles will quickly become informal again. Eliminating unnecessary obstacles to registering and transferring property is therefore important for economic development. Doing Business records the full sequence of procedures necessary for a business (buyer) to purchase a property from another business (seller) and to transfer the property title to the buyer's name. The property of land and building will be transferred in its entirety. The transaction is considered complete when the buyer can use the property as collateral for a bank loan. Local property lawyers and officials in property registries provide information on required procedures as well as the time and cost to complete each one. For most economies the data are based on responses from both. Based on the responses, three indicators are constructed. · Number of procedures to register property. · Time to register property (in calendar days). · Official costs to register property (as a percentage of the property value). Many titling programs in Africa were futile because people bought and sold property informally, neglecting to update the title records in the property registry. Why? Doing Business shows that completing a simple formal property transfer in the largest business city of an African economy cost 10% of the value of the property and takes on average 90 days. Worse, the property registries are so poorly organized that they provide little security of ownership. Efficient property registration reduces transaction costs and helps to formalize property titles. Simple procedures to register property are also associated with greater perceived security of property rights and less corruption. That benefits all entrepreneurs, especially women, the young and the poor. The rich have few problems protecting their property rights. They can afford to invest in security systems and other measures to defend their property. But small entrepreneurs cannot. Reform can change this. Twenty-four economies made it easier to register property in 2007/08. The most popular reform: lowering the cost of registration by reducing the property transfer tax, registration fees or stamp duty. 19 1. Historical data: Registering Property in Belarus Registering Property data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 95 14 Procedures (number) 7 7 4 Duration (days) 231 231 21 Cost (% of property value) 0.1 0.1 0.0 2. The following graphs illustrates the Registering Property indicators in Belarus over the past 3 years: 20 3. Steps to Registering Property in Belarus It requires 4 procedures, takes 21 days, and costs 0.04 % of property value to register the property in Belarus. List of Procedures: 1. Obtaining a non-encumbrance certificate 2. Notarization of seller's and buyer's incorporation documents 3. Obtain municipality's approval 4. The buyer applies to the Registry for registration of the sale-purchase agreement and his title to the property More detail is included in the appendix. 21 4. Benchmarking Registering Property Regulations: Belarus is ranked 14 overall for Registering Property. Ranking of Belarus in Registering Property - Compared to good practice and selected economies: * The following economies are also good practice economies for Registering Property: Georgia, Saudi Arabia 22 The following table shows Registering Property data for Belarus compared to good practice and comparator economies: Good Practice Procedures Duration Cost (% of Economies (number) (days) property value) New Zealand* 2 Norway* 1 Saudi Arabia 0.0 Selected Economy Belarus 4 21 0.0 Comparator Economies Kazakhstan 5 40 0.1 Kyrgyz Republic 7 8 3.9 Moldova 6 48 0.8 Russian Federation 6 52 0.2 Tajikistan 6 37 1.8 Ukraine 10 93 2.9 * The following economies are also good practice economies for : Procedures (number): Sweden Duration (days): Saudi Arabia, Sweden, Thailand 23 Firms consistently rate access to credit as among the greatest barriers to their operation and growth. Doing Business constructs two sets of indicators of how well credit markets function: one on credit registries and the other on legal rights of borrowers and lenders. Credit registries, institutions that collect and distribute credit information on borrowers, can greatly expand access to credit. By sharing credit information, they help lenders assess risk and allocate credit more efficiently. And they free entrepreneurs from having to rely on personal connections alone when trying to obtain credit. Three indicators are constructed to measure the sharing of credit information: · Depth of credit information index, which measures the extent to which the rules of a credit information system facilitate lending based on the scope of information distributed, the ease of access to information and the quality of information. · Public registry coverage, which reports the number of individuals and firms covered by a public credit registry as a percentage of the adult population. · Private bureau coverage, which reports the number of individuals and firms, covered by a private credit bureau as a percentage of the adult population. The strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. This year, three main changes were made; first, a standardized case scenario with specific assumptions was introduced to bring this indicator into line with other Doing Business indicators. Second, the indicator now focuses not on tangible movable collateral, such as equipment, but on revolving movable collateral, such as accounts receivable and inventory. Third, the indicator no longer considers whether management remains in place during a reorganization procedure, better accommodating economies that adopt reorganization procedures. The strength of legal rights index includes 8 aspects related to legal rights in collateral law and 2 aspects in bankruptcy law: · Any business may use movable assets as collateral while keeping possession of the assets, and any financial institution may accept such assets as collateral. · The law allows a business to grant a non possessory security right in a single category of revolving movable assets, without requiring a specific description of the secured assets. · The law allows a business to grant a non possessory security right in substantially all of its assets, without requiring a specific description of the secured assets. · A security right may extend to future or after-acquired assets and may extend automatically to the products, proceeds or replacements of the original assets. · General description of debts and obligations is permitted in collateral agreements and in registration documents, so that all types of obligations and debts can be secured by stating a maximum rather than a specific amount between the parties. · A collateral registry is in operation that is unified geographically and by asset type and that is indexed by the name of the grantor of a security right. · Secured creditors are paid first when a debtor defaults outside an insolvency procedure or when a business is liquidated. · Secured creditors are not subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure. · The law allows parties to agree in a collateral agreement that the lender may enforce its security right out of court. 24 1. Historical data: Getting Credit in Belarus Getting Credit data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 126 109 Legal Rights Index 2 2 2 Credit Information Index 3 3 5 Public registry coverage (% adults) not available 1.1 2.4 Private bureau coverage (% adults) 0.0 0.0 0.0 2. The following graphs illustrates the Getting Credit indicators in Belarus over the past 3 years: 25 3. Benchmarking Getting Credit Regulations: Belarus is ranked 109 overall for Getting Credit. Ranking of Belarus in Getting Credit - Compared to good practice and selected economies: 26 The following table shows Getting Credit data for Belarus compared to good practice and comparator economies: Good Practice Legal Rights Credit Public Private Economies Index Information registry bureau Index coverage (% coverage (% adults) adults) Malaysia* 10 New Zealand* 100.0 Portugal 76.4 United Kingdom 6 Selected Economy Belarus 2 5 2.4 0.0 Comparator Economies Kazakhstan 5 6 0.0 25.6 Kyrgyz Republic 7 5 0.0 3.7 Moldova 8 0 0.0 0.0 Russian Federation 3 4 0.0 10.0 Tajikistan 2 0 0.0 0.0 Ukraine 9 3 0.0 3.0 * The following economies are also good practice economies for : Legal Rights Index: Hong Kong, China, Kenya, Singapore Private bureau coverage (% adults): Argentina, Australia, Canada, Iceland, Ireland, Nicaragua, Norway, Sweden, United Kingdom, United States 24 countries have the highest credit information index. 27 Companies grow by raising capital, either through a bank loan or by attracting equity investors. Selling shares allows companies to expand without the need to provide collateral and repay bank loans. But investors worry about their money, and look for laws that protect them. A study finds that the presence of legal and regulatory protections for investors explains up to 73% of the decision to invest. In contrast, company characteristics explain only between 4% and 22%*. Good protections for minority shareholders are associated with larger and more active stock markets. Thus both governments and businesses have an interest in reforms strengthening investor protections. To document some of the protections investors have, Doing Business measures how economies regulate a standard case of self-dealing, use of corporate assets for personal gain. The case facts are straightforward. Mr. James, a director and the majority shareholder of a public company, proposes that the company purchase used trucks from another company he owns. The price is higher than the going price for used trucks. The transaction goes forward. All required approvals are obtained, and all required disclosures made, though the transaction is prejudicial to the purchasing company. Shareholders sue the interested parties and the members of the board of directors. Several questions arise. Who approves the transaction? What information must be disclosed? What company documents can investors access? What do minority shareholders have to prove to get the transaction stopped or to receive compensation from Mr. James? Three indices of investor protection are constructed based on the answers to these and other questions. All indices range from 0 to 10, with higher values indicating more protections or greater disclosure. · The extent of disclosure index covers approval procedures, requirements for immediate disclosure to the public and shareholders of proposed transactions, requirements for disclosure in periodic filings and reports and the availability of external review of transactions before they take place. · The extent of director liability index covers the ability of investors to hold Mr. James and the board of directors liable for damages, the ability to rescind the transaction, the availability of fines and jail time associated with self-dealing, the availability of direct or derivative suits and the ability to require Mr. James to pay back his personal profits from the transaction. · The ease of shareholder suits index covers the availability of documents that can be used during trial, the ability of the investor to examine the defendant and other witnesses, shareholders' access to internal documents of the company, the appointment of an inspector to investigate the transaction and the standard of proof applicable to a civil suit against the directors. These three indices are averaged to create the strength of investor protection index. This index ranges from 0 to 10, with higher values indicating better investor protection. *Doidge, Kardyi and Stulz (2007) 28 1. Historical data: Protecting Investors in Belarus Protecting Investors data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 101 104 Investor Protection Index 4.0 4.7 4.7 2. The following graph illustrates the Protecting Investors index in Belarus compared to best practice and selected Economies: 7.9 7.7 7.5 0.5 7.4 7.4 7.3 3.3 d z e w Zealan ic hstan n va Kyrgypubl ldo Belarus kistan Kazak Russian Mo Ukrain Taji Ne Re Federatio Note: The higher the score, the greater the investor protection. 29 3. Benchmarking Protecting Investors Regulations: Belarus is ranked 104 overall for Protecting Investors. Ranking of Belarus in Protecting Investors - Compared to good practice and selected economies: 30 The following table shows Protecting Investors data for Belarus compared to good practice and comparator economies: Good Practice Investor Economies Protection Index New Zealand 9.7 Selected Economy Belarus 4.7 Comparator Economies Kazakhstan 5.7 Kyrgyz Republic 7.7 Moldova 4.7 Russian Federation 5.0 Tajikistan 3.3 Ukraine 3.7 31 Taxes are essential. Without them there would be no money to provide public amenities, infrastructure and services which are crucial for a properly functioning economy. But particularly for small and medium size companies, they may opt out and choose to operate in the informal sector. One way to enhance tax compliance is to ease and simplify the process of paying taxes for such businesses. The Doing Business tax survey records the effective tax that a small and medium company must pay and the administrative costs of doing so. Imagine a medium-size business, TaxpayerCo, that started operations last year. Doing Business asks tax practitioners in 181 economies to review TaxpayerCo's financial statements and a standard list of transactions that the company completed during the year. Respondents are asked how much in taxes and mandatory contributions the business must pay and what the process is for doing so. The business starts from the same financial position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded. Taxes and mandatory contributions are measured at all levels of government and include corporate income tax, turnover tax, all labor taxes and contributions paid by the company (including mandatory contributions paid to private pension or insurance funds), property tax, property transfer tax, dividend tax, capital gains tax, financial transactions tax, vehicle tax, sales tax and other small taxes (such as fuel tax, stamp duty and local taxes). A range of standard deductions and exemptions are also recorded. Three indicators are constructed: · Number of tax payments, which takes into account the method of payment, the frequency of payments and the number of agencies involved in our standardized case study. · Time, which measures the number of hours per year necessary to prepare and file tax returns and to pay the corporate income tax, value added tax, sales tax or goods and service tax and labor taxes and mandatory contributions. · Total tax rate, which measures the amount of taxes and mandatory contributions payable by the company during the second year of operation. This amount, expressed as a percentage of commercial profit, is the sum of all the different taxes payable after accounting for various deductions and exemptions. Businesses care about what they get for their taxes and contributions, such as the quality of infrastructure and social services. Efficient tax systems tend to have less complex tax arrangements, comprising of straightforward compliance procedures and clear laws. Taxpayers in such economies often get more from their taxes. Simple, moderate taxes and fast, cheap administration mean less hassle for businesses, and also more revenue collected and better public services. More burdensome tax regimes create an incentive to evade taxes. 32 1. Historical data: Paying Taxes in Belarus Paying Taxes data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 181 181 Time (hours) 1188 1188 1188 Total tax rate (% profit) 137.5 120.8 117.5 Payments (number) 125 124 112 2. The following graphs illustrates the Paying Taxes indicators in Belarus over the past 3 years: 33 3. Benchmarking Paying Taxes Regulations: Belarus is ranked 181 overall for Paying Taxes. Ranking of Belarus in Paying Taxes - Compared to good practice and selected economies: * The following economies are also good practice economies for Paying Taxes: Maldives, Qatar 34 The following table shows Paying Taxes data for Belarus compared to good practice and comparator economies: Good Practice Payments Time (hours) Total tax rate Economies (number) (% profit) Luxembourg* 59 Sweden* 2 Vanuatu 8.4 Selected Economy Belarus 112 1188 117.5 Comparator Economies Kazakhstan 9 271 36.4 Kyrgyz Republic 75 202 61.4 Moldova 53 234 42.1 Russian Federation 22 448 48.7 Tajikistan 54 224 85.5 Ukraine 99 848 58.4 * The following economies are also good practice economies for : Payments (number): Maldives, Qatar Time (hours): Bahamas, Bahrain, Maldives, Qatar, United Arab Emirates 35 The benefits of trade are well documented; as are the obstacles to trade. Tariffs, quotas and distance from large markets greatly increase the cost of goods or prevent trading altogether. But with bigger ships and faster planes, the world is shrinking. Global and regional trade agreements have reduced trade barriers. Yet Africa's share of global trade is smaller today than it was 25 years ago. So is the Middle East's, excluding oil exports. Many entrepreneurs face numerous hurdles to exporting or importing goods, including delays at the border. They often give up. Others never try. In fact, the potential gains from trade facilitation may be greater than those arising from only tariff reductions. Doing Business compiles procedural requirements for trading a standard shipment of goods by ocean transport. Every procedure and the associated documents, time and cost, for importing and exporting the goods is recorded, starting with the contractual agreement between the two parties and ending with delivery of the goods. For importing the goods, the procedures measured range from the vessel's arrival at the port of entry to the shipment's delivery at the importer's warehouse. For exporting the goods, the procedures measured range from the packing of the goods at the factory to their departure from the port of exit. Payment is by letter of credit and the time and cost for issuing or securing a letter of credit is taken into account. To make the data comparable across countries, several assumptions about the business and the traded goods are used. The business is of medium size, employs 60 people, and is located in the periurban area of the economy's most populous city. It is a private, limited liability company, domestically owned, formally registered and operating under commercial laws and regulations of the economy. The traded goods are ordinary, legally manufactured products transported in a dry-cargo, 20-foot FCL (full container load) container. Documents recorded include port filing documents, customs declaration and clearance documents, as well as official documents exchanged between the parties to the transaction. Time is recorded in calendar days, from the beginning to the end of each procedure. Cost includes the fees levied on a 20-foot container in U.S. dollars. All the fees associated with completing the procedures to export or import the goods are included, such as costs for documents, administrative fees for customs clearance and technical control, terminal handling charges and inland transport. The cost measure does not include tariffs or duties. Economies that have efficient customs, good transport networks and fewer document requirements, making compliance with export and import procedures faster and cheaper, are more competitive globally. That can lead to more exports; and exports are associated with faster growth and more jobs. Conversely, a need to file many documents is associated with more corruption in customs. Faced with long delays and frequent demands for bribes, many traders may avoid customs altogether. Instead, they smuggle goods across the border. This defeats the very purpose in having border control of trade to levy taxes and ensure high quality of goods. 36 1. Historical data: Trading Across Borders in Belarus Trading Across Borders data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 142 134 Documents for export (number) 8 8 8 Time for export (days) 24 24 20 Cost to export (US$ per container) 1672 1672 1772 Documents for import (number) 8 8 8 Time for import (days) 29 29 26 Cost to import (US$ per container) 1672 1672 1720 2. The following graphs illustrates the Trading Across Borders indicators in Belarus over the past 3 years: 37 3. Benchmarking Trading Across Borders Regulations: Belarus is ranked 134 overall for Trading Across Borders. Ranking of Belarus in Trading Across Borders - Compared to good practice and selected economies: 38 The following table shows Trading Across Borders data for Belarus compared to good practice and comparator economies: Good Practice Documents Time for Cost to Documents Time for Cost to Economies for export export (days) export (US$ for import import (days) import (US$ (number) per (number) per container) container) Denmark* 5 France 2 2 Malaysia 450 Singapore 3 439 Selected Economy Belarus 8 20 1772 8 26 1720 Comparator Economies Kazakhstan 11 89 3005 13 76 3055 Kyrgyz Republic 13 64 3000 13 75 3250 Moldova 6 32 1775 7 35 1895 Russian Federation 8 36 2150 13 36 2150 Tajikistan 10 82 3150 10 83 4550 Ukraine 6 31 1230 10 36 1250 * The following economies are also good practice economies for : Time for export (days): Estonia, Singapore 39 Where contract enforcement is efficient, businesses are more likely to engage with new borrowers or customers. Doing Business tracks the efficiency of the judicial system in resolving a commercial dispute, following the step-by-step evolution of a commercial sale dispute before local courts. The data is collected through study of the codes of civil procedure and other court regulations as well as through surveys completed by local litigation lawyers (and, in a quarter of the countries, by judges as well). The dispute concerns a contract for the sale of goods between two businesses (the Seller and the Buyer) both located in the economy's largest business city. The Seller sells and delivers goods, worth 200% of the economy's income per capita, to the Buyer. The Buyer refuses to pay on the grounds that they were not of adequate quality. The Seller sues the Buyer to recover the amount under the sales agreement (200% of the economy's income per capita). The claim is filed before a court in the economy's largest business city with jurisdiction over commercial cases worth 200% of the income per capita and is disputed on the merits. Judgment is 100% in favor of the Seller and is not appealed. Seller enforces the judgment and the money is successfully collected through a public sale of Buyer's assets. Rankings on enforcing contracts are based on 3 sub-indicators: · Number of procedures, which are defined as any interaction between the parties or between them and the judge or court officer. This includes steps to file the case, steps for trial and judgment and steps necessary to enforce the judgment. · Time, which counts the number of calendar days from the moment the Seller files the lawsuit in court until payment is received. This includes both the days on which actions take place and the waiting periods in between. · Cost, which is recorded as a percentage of the claim (assumed to be equivalent to 200% of income per capita). Three types of costs are recorded: court costs (including expert fees), enforcement costs (including costs for a public sale of Buyer's assets) and attorney fees. Justice delayed is often justice denied. And in many economies only the rich can afford to go to court. For the rest, justice is out of reach. In the absence of efficient courts, firms undertake fewer investments or business transactions. And they prefer to involve only a small group of people who know each other from previous dealings. 40 1. Historical data: Enforcing Contracts in Belarus Enforcing Contracts data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 15 14 Procedures (number) 28 28 28 Duration (days) 225 225 225 Cost (% of claim) 23.4 23.4 23.4 2. The following graphs illustrates the Enforcing Contracts indicators in Belarus over the past 3 years: 41 3. Benchmarking Enforcing Contracts Regulations: Belarus is ranked 14 overall for Enforcing Contracts. Ranking of Belarus in Enforcing Contracts - Compared to good practice and selected economies: 42 The following table shows Enforcing Contracts data for Belarus compared to good practice and comparator economies: Good Practice Procedures Duration Cost (% of Economies (number) (days) claim) Iceland* 6.2 Ireland 20 Singapore 150 Selected Economy Belarus 28 225 23.4 Comparator Economies Kazakhstan 38 230 22.0 Kyrgyz Republic 39 177 29.0 Moldova 31 365 16.6 Russian Federation 37 281 13.4 Tajikistan 34 295 20.5 Ukraine 30 354 41.5 * The following economies are also good practice economies for : Cost (% of claim): Bhutan 43 The economic crises of the 1990s in emerging markets--from East Asia to Latin America, from Russia to Mexico--raised concerns about the design of bankruptcy systems and the ability of such systems to help reorganize viable companies and close down unviable ones. In countries where bankruptcy is inefficient, unviable businesses linger for years, keeping assets and human capital from being reallocated to more productive uses. The Doing Business indicators identify weaknesses in the bankruptcy law as well as the main procedural and administrative bottlenecks in the bankruptcy process. In many developing countries bankruptcy is so inefficient that the parties hardly ever use it. In countries such as these, reform would best focus on improving contract enforcement outside bankruptcy. The data on closing a business are developed using a standard set of case assumptions to track a company going through the step-by-step procedures of the bankruptcy process. It is assumed that the company is a domestically owned, limited liability corporation operating a hotel in the country's most populous city. The company has 201 employees, 1 main secured creditor and 50 unsecured creditors. Assumptions are also made about the debt structure and future cash flows. The case is designed so that the company has a higher value as a going concern--that is, the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. The data are derived from questionnaires answered by attorneys at private law firms. Three measures are constructed from the survey responses: the time to go through the insolvency process, the cost to go through the process and the recovery rate--how much of the insolvency estate is recovered by stakeholders, taking into account the time, cost, depreciation of assets and the outcome of the insolvency proceeding. Bottlenecks in bankruptcy cut into the amount claimants can recover. In countries where bankruptcy laws are inefficient, this is a strong deterrent to investment. Access to credit shrinks, and nonperforming loans and financial risk grow because creditors cannot recover overdue loans. Conversely, efficient bankruptcy laws can encourage entrepreneurs. The freedom to fail, and to do so through an efficient process, puts people and capital to their most effective use. The result is more productive businesses and more jobs. 44 1. Historical data: Closing Business in Belarus Closing a Business data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 72 71 Time (years) 5.8 5.8 5.8 Cost (% of estate) 22 22 22 Recovery rate (cents on the dollar) 31.8 33.2 33.4 2. The following graphs illustrates the Closing Business indicators in Belarus over the past 3 years: 45 3. Benchmarking Closing Business Regulations: Belarus is ranked 71 overall for Closing a Business. Ranking of Belarus in Closing Business - Compared to good practice and selected economies: 46 The following table shows Closing Business data for Belarus compared to good practice and comparator economies: Good Practice Recovery rate Time (years) Cost (% of Economies (cents on the estate) dollar) Ireland 0.4 Japan 92.5 Singapore* 1 Selected Economy Belarus 33.4 5.8 22 Comparator Economies Kazakhstan 25.3 3.3 18 Kyrgyz Republic 14.2 4.0 15 Moldova 28.6 2.8 9 Russian Federation 28.2 3.8 9 Tajikistan 25.4 3.0 9 Ukraine 9.1 2.9 42 * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 47 Number of reforms in Doing Business 2009 Positive Reform Borders Negative Reform Construction Total Businessa Workers Property Investors number with Credit Across Contracts Taxes Businessa of reforms Rank Economy Starting Dealing Permits Employing Registering Getting Protecting Paying Trading Enforcing Closing 1 Azerbaijan 7 2 Albania 4 3 Kyrgyz Republic 3 4 Belarus 6 5 Senegal 3 6 Burkina Faso 4 7 Botswana 3 8 Colombia 5 9 Dominican Republic 4 10 Egypt 6 Russian Federation Tajikistan 1 Kazakhstan 2 Moldova 2 Ukraine 3 Note: Economies are ranked on the number and impact of reforms, Doing Business selects the economies that reformed in 3 or more of the Doing Business topics. Second, it ranks these economies on the increase in rank in Ease of Doing Business from the previous year. The larger the improvement, the higher the ranking as a reformer. 48 Albania Albania, a top reformer globally and regionally, established a public credit registry allowing financial institutions to share credit information and covering 8.3 percent of the adult population. This reform allows banks to better evaluate the creditworthiness of potential borrowers, facilitating access to credit for firms and individuals. Albania also strengthened investor protections. A new company law requires that disinterested shareholders approve transactions between interested parties and obligates those parties to disclose all information on the transaction to the public. The law also reinforces directors' duties and requires directors, when found liable, to pay damages and return profits to the company. Starting a business became easier with online publication, reduction of the registration cost, and the consolidation of tax, health insurance, and labor registration into a single application. The corporate income tax rate was reduced from 20 percent to 10 percent effective January 1, 2008. Azerbaijan Azerbaijan, the top reformer globally and regionally, eliminated the minimum threshold for reporting loans to the public credit registry in September 2007. The public registry now records information on all loans made by the financial system, more than doubling the coverage of borrowers with a credit history. Substantial amendments to the labor code in May 2007 made hiring workers easier by allowing employers to use fixed-term contracts for permanent tasks, easing restrictions on night work, and reducing requirements for redundancy dismissals. Azerbaijan created a second commercial court in Baku, increasing the number of judges dealing with commercial cases from five to nine. The average time to enforce a contract through the courts fell from 267 days to 237. A new law strengthens investor protections by requiring that transactions between interested parties be approved by shareholders. Interested parties are allowed to vote on the matter. Other provisions protect investors because directors who are held liable must pay damages and disgorge profits. Azerbaijan introduced a new unified property registry, reducing the number of procedures required to register property from seven to four. In addition, the State Register Service introduced the option of expediting two of the four procedures, making it possible to register property in 11 days. Similarly, the country created a one-stop shop for company registration, cutting the number of procedures from 13 to six and reducing the time required by half. Azerbaijan reduced the tax burden by introducing an online filing and payment system with advanced accounting software for calculating taxes due. This saves more than 500 hours a year on average in dealing with paperwork. Belarus In Belarus, a top reformer globally and regionally, the public credit registry expanded credit information by eliminating the minimum threshold for loans recorded in its database. It also guaranteed the right of borrowers to review their data, improving accuracy. Starting a business became easier: a unified registry database was created, a time limit was introduced for registration, and the minimum capital requirement was cut by half. Belarus created a one-stop shop for property registration and introduced a broad administrative simplification program that set strict time limits at the registry and computerized its records. As a result, the time required to register property in Minsk fell from 231 days to 21. The time required for dealing with construction permits fell by 140 days, thanks to new statutory time limits for preapproval clearances and building permits. Belarus eased the tax burden by abolishing the "Chernobyl tax" (3 percent) and unemployment tax (1 percent) and amending the simplified tax system for small businesses. A new customs code and new banking regulations reduced the time to export Botswana Botswana improved its business environment by speeding the start-up process through computerization. A similar effort, which included training customs officers in using an electronic data interchange system, sped the processing of trade documents and reduced the time to export by two days and the time to import by a day. A new Company Act has come into force, requiring that shareholders approve related-party transactions and that directors repay damages and surrender profits if held liable. Finally, since January 2008, companies have been required to pay 0.2 percent of turnover for the training of workers. Burkina Faso Burkina Faso eliminated random inspections during construction. It also introduced a new one-stop shop for construction permits, which reduced approval fees and combined five separate payments into a single one. A new labor code, approved in May 2008, makes hiring workers easier by allowing employers to use fixed-term contracts for permanent tasks, removing the 48-month limit on the duration of such contracts, and easing restrictions on determining the weekly rest day. Requirements for redundancy dismissals were also eased: third-party notification and consent are no longer required for dismissal of a single worker, and priority rules for dismissals were abolished. Burkina Faso made it easier to transfer property by eliminating the requirement for authorization from the municipality, merging two taxes at the Land Registry (Conservation Foncière), and reducing the transfer tax. The changes reduced the time required by 46 days and the cost by 2 percent of the property value. Finally, Burkina Faso reduced the corporate income tax rate from 35 percent to 30 percent (effective January 1, 2008), and the tax on dividends from 15 percent to 12.5 percent. 49 Colombia Colombia, a top global and regional reformer, improved in five of the 10 Doing Business indicators. It reduced the time and cost to start a business by simplifying registration formalities, including speeding up processes at the registry and eliminating the need to obtain a certificate of compliance with zoning regulations. A silence-is-consent principle for building permits is now applied, reducing the total time for dealing with construction permits by 32 days. A new unified application form was introduced. Colombia made electronic social security contributions mandatory for companies with more than 30 employees and created unified electronic forms for filing taxes. Trading across borders was expedited: better banking services and the implementation of e-payments, electronic data interchange, and coordinated inspections in customs reduced the time to export by 10 days and the time to import by five. Authorities also introduced two new insolvency proceedings: a reorganization procedure to restructure insolvent companies and a mandatory liquidation procedure. Its new insolvency law tightens time limits for negotiating reorganization agreements. Before, the term allowed was six months, with a possible extension of eight months. The new law limits the term to four months, and the extension to two. Dominican Republic The Dominican Republic, a top global and regional reformer, sped up formalities in several areas by making them electronic. An online system for filing and paying taxes, piloted in 2006, is now fully operational. And entrepreneurs can complete several start-up formalities online, including name verification, and commercial and tax registration. The Dominican Republic also reduced the corporate income tax rate from 29% to 25%, and abolished several taxes, including the stamp duty. The cost of property registration fell, thanks to a reduction in the transfer tax from 4.3% to 3%. Transferring property now costs 3.8% of the property value, down from 5.1%. In addition, authorities reduced the time to export by three days by improving the online portal for customs documentation and payment. Egypt Egypt was once again among the top 10 global reformers--the third time in 4 years--and top regional reformer this year. Egypt made starting a business easier by reducing the paid-in minimum capital requirement by more than 80%, abolishing bar association fees, and automating tax registration. A new building code introduced in 2008 is aimed at reducing the procedures and time required to deal with construction permits by establishing a single window for processing construction-related approvals. Simplified administrative procedures for registering property and new time limits have reduced the time to transfer property in Cairo from 193 days to 72. The port of Alexandria continued to upgrade its facilities and sped customs clearance, reducing the time to export by 1 day and the time to import by 3. New listing rules for the Cairo Stock Exchange strengthened protections for minority shareholders: now an independent body must assess transactions between interested parties before they are approved. And thanks to new regulations issued by the Central Bank of Egypt, borrowers have the right to inspect their data in the private credit bureau. Kazakhstan Kazakhstan's private credit bureau is adding two new suppliers of information a month, including retailers (such as furniture companies) and utilities (such as the gas company). Borrower coverage increased by 80 percent in the past year. A new law introduced substantial changes to the property registration system, creating a unified registry for all land and buildings and establishing public service centers to handle property transactions in major cities. The law also eliminated requirements, cutting the number of procedures from eight to five and the time from 52 days to 40. A new labor law, adopted in May 2007, now obligates employers to reassign a worker before making the worker redundant. Kyrgyz Republic The Kyrgyz Republic, a top reformer globally and regionally, strengthened investor protections through legal amendments allowing minority investors to take legal actions as shareholders. The amendments also require an independent assessment of a related-party transaction before it is approved. Moreover, directors can be held liable for negligence if they harm minority shareholders and will be forced to pay damages and disgorge profits. A new one-stop shop made it easier to start a business by streamlining and simplifying business registration processes and eliminating certain requirements such as proof of residence. Obtaining a company seal became optional. Dealing with construction permits also became easier, thanks to a one-stop shop making it possible to obtain a designing permit, construction license, and occupancy permit at a single place. This reform eliminated nine steps, reduced the time required by almost 6 months, and lowered the cost from 759 percent of income per capita to 406 percent. Moldova Moldova passed a new law facilitating the creation of a private credit bureau. New laws on limited liability companies and company registration sped business registration by introducing statutory time limits. The time required to file an application with the State Registration Chamber fell from 15 days to 7, reducing the total time to start a company from 23 days to 15. Russian Federation In the Russian Federation no major reforms were recorded. 50 Senegal Senegal's one-stop shop for business start-up became fully operational, merging more than half the procedures and speeding the process as a result. Similarly, the introduction of time limits at the Land Registry and the Directorate of Taxes and Property sped property registration. The top reformer globally in easing trade, Senegal introduced a single window for customs clearance, cutting document requirements in half. It also set up an electronic data interchange system, implemented risk-based inspections, extended the operating hours of customs, and improved port and road infrastructure. Tajikistan Tajikistan enhanced investor protections through a new law requiring that transactions between interested parties be approved by a shareholders meeting at which interested directors cannot vote. In addition, the transaction must be disclosed to the board of directors. The new law allows minority shareholders to sue directors on behalf of the company. Administrative backlogs in obtaining location permits added 160 days to the overall time for dealing with construction permits. Ukraine In Ukraine a new private credit bureau has made it easier to get credit by sharing credit information among financial institutions. Now banks can better assess the creditworthiness of potential borrowers. Ukraine eased the tax burden on businesses by reducing several social security tax rates including: pension fund, social security fund, and social insurance for accidents at work. Thanks to electronic tax filing systems, the time to pay taxes was reduced by 1237 hours per year. In trade, improvements to port infrastructure and services reduced the time to import by three days. The cost and time for dealing with construction permits increased. All new construction projects are now subject to an infrastructure tax. And an administrative backlog has added 42 days to the time. 51 APPENDICES Starting a Business in Belarus This table summarizes the procedures and costs associated with setting up a business in Belarus. STANDARDIZED COMPANY Legal Form: Private Limited Company Minimum Capital Requirement: City: Minsk Registration Requirements: No: Procedure Time to complete Cost to complete 1 Obtain an approval of the company name with the Registry Office 1 day no charge 2 Open a temporary bank account 1 day no charge 3 Notarize documents and pay a registry fee 1 day BYR 432600 4 Business registration with the State Registry 21 days BYR 175,000 5 Prepare a business seal 1 day BYR 50,000 6 Obtain duplicates of company tax identification for opening bank 4 days BYR 35,000 account 7 Notarize signature card and seal 1 day BYR 70,000 8 Open a regular bank account 1 day no charge 52 Procedure 1 Obtain an approval of the company name with the Registry Office Time to complete: 1 day Cost to complete: no charge Comment: One of the company founders must present an application to the Ministry of Justice with proposed company names. An official checks whether the proposed names are available for registration and, if so, issues a certificate for the name. Procedure 2 Open a temporary bank account Time to complete: 1 day Cost to complete: no charge Comment: Founders of a private limited liability company must deposit 50% of the company's fund before the registration procedure. Procedure 3 Notarize documents and pay a registry fee Time to complete: 1 day Cost to complete: BYR 432600 Comment: As of December 2007, the new State Duty Act 301-3 establishes notary fees as follows. The minimum payment for notarization is BYR 327, 600 and includes up two founders. Each additional founder will increase the fee by one base rate, that is, by BYR 35 000. Notary fees depend on the number of (a) signatures on the company charter and (b) constituent agreement duplicates. Procedure 4 Business registration with the State Registry Time to complete: 21 days Cost to complete: BYR 175,000 Comment: The registry checks the founders' backgrounds and enters the company into the unified registration database. Since 2005 the registration process has become slightly faster because the Company Registration Commission meets every week instead of every 2 weeks. However, if the registry requires more information about the company founders, it can extend the term for 2 months. In 2006 a one-stop shop was created at the Commercial Registry based on the Presidential Decree on Regulation of State Registration and Liquidation of Companies N11. With the new system, the registry combines the procedure for approval of the draft company seal with that for registration with the tax, statistical, and social security authorities and with the state insurance company. According to the Presidential Decree on Regulation of State Registration and Liquidation of Companies 8 of 17/12/2007 the registry enters the company into the unified registration database during 5 days. 15 days include the procedure of registration in the tax, statistical and social security authorities. Procedure 5 Prepare a business seal Time to complete: 1 day 53 Cost to complete: BYR 50,000 Comment: Procedure 6 Obtain duplicates of company tax identification for opening bank account Time to complete: 4 days Cost to complete: BYR 35,000 Comment: The company must get one duplicate of its taxpayer identification for each bank account. The cost is based on a base rate : 35 000. If the company opens bank accounts in different currencies (BR, USD, EUR, etc.), it must get additional duplicates. The turnaround time varies from 3 days to 7. Procedure 7 Notarize signature card and seal Time to complete: 1 day Cost to complete: BYR 70,000 Comment: Notary fees depend on on the number of signatures on the bank -card. On December 26, 2007 the State Duty Act 301-3 increased notary fees and established the base rate, that is, by BYR 35 000. Procedure 8 Open a regular bank account Time to complete: 1 day Cost to complete: no charge Comment: 54 Dealing with Construction Permits in Belarus The table below summarizes the procedures, time, and costs to build a warehouse in Belarus. BUILDING A WAREHOUSE Date as of: January 2,008 Estimated Warehouse Value: City: Minsk Registration Requirements: No: Procedure Time to complete Cost to complete 1 Obtain Decision from the Minsk City Executive Committee for elaboration 20 days no charge of design documentation on sepcified land plot 2 Obtain state ecological expertise of design documentation 20 days no charge 3 * Obtain state expertise of design documentation 20 days BYR 2,700,000 4 Obtain approval of design documentation 20 days no charge 5 Obtain the permit for building on specified land plot 20 days no charge 6 Obtain the building permit 10 days no charge 7 Apply for electric power connection 1 day BYR 120,000 8 Obtain deeds of inspection and testing of engineering networks and 1 day BYR 20,000 systems for the electrical connection structure 9 Receive connection to electricity 13 days no charge 10 Apply for telephone connection 1 day BYR 350,000 11 Receive on-site inspection for telephone connection 1 day no charge 12 Receive installation of telephone line 5 days no charge 13 Apply for water and sewerage connection 1 day BYR 310,000 14 * Receive on-site inspection and installation for water and sewerage 1 day no charge connection 15 * Receive installation of water and sewerage connection 5 days no charge 55 16 Request inspection by the Acceptance Commission and signature of 21 days no charge Acceptance Act 17 Register the building with Real Estate Registry 73 days BYR 340,000 * Takes place simultaneously with another procedure. 56 Procedure 1 Obtain Decision from the Minsk City Executive Committee for elaboration of design documentation on sepcified land plot Time to complete: 20 days Cost to complete: no charge Comment: To start construction, BuildCo must receive the Minsk City Executive Committee's decision to elaborate on design documentation. The permission letter states the main requirements for the intended building and lists the agencies and the institutions where additional technical requirements must be obtained. The request form must contain a brief description of the intended building project and company documents. On 26 April 2007 the Minsk City Municipality passed Decision # 859 according to which the applicants can choose to obtain technical conditions or request Centre of Engineering Services to obtain on behalf of applicant. Prior to reform the Centre used to be Department of Technical Conditions of the Committee of Architecture and City Construction. Now the Centre operates as semi-private entity and if work load increases it can recruit additional human resources. Other significant improvement is that before while being a state entity the Centre could not receive payments in advance. This led to serious delays and lack of funds for paying the consultants. Now applicants can pay the Centre in advance and secure a fast service. Centre does not provide a fast track service yet. After the documents are submitted to the Reception Desk it is trickled to the respetive departments, and if it applicant wishes to obtain the technical conditions through the Centre, the papers go internally to the Centre. Changes to the Resolution of the Cabinet of Ministers N 223 (20 February 2008) "On Some Measures to Improving Architectural and Construction Activity" have been recorded to have impact on all pre-approval procedures, and will be reflected in the Doing Business 2009. To be specific the procedure for obtaining the Architectural and Planning Terms (APZ in Russian) prior to changes in the above Resolution used to be 30 calendar days. Now the official time-limit is 20 working days which is the same number of days. However, often cases as simple as described for BuildCo are cleared in 20 calendar days, before the official time-limit expires. The City of Minsk and its Committee of Architecture and City Construction have obtained sophisticated equipment for scanning drawings and plans. Internally all respective departments have access to this network that allows them see updates to cadastre. Since 2004 the City of Minsk and its Committee of Architecture and City Construction work under a new software system that allows all internal documentation to be controlled for approval time-limit compliance. Time-limits are strictly followed and enforced by the authority. In case if they are not respected applicants, however can not take it as silence is consent. But they can resort to writing a formal complaint to the Head of Committee and to State Control Authority. The latter is a special body that is responsible for ensuring the compliance of all state authorities with existing legislation. Besides an administrative penalty and fine of 300 minimal base indices the officials may be charged with criminal offence. All services that issue technical conditions have a time-limit of 7 working days during which the approvals must be granted. All the approvals can be obtained in parallel. The services that are involved and would be required for BuildCo's case are: water/sewage, telephone, electricity, sanitary epidemiological authority, ecological department, fire safety. Should BuildCo want to have a TV set, it must obtain a separate technical condition from a special authority. By law all technical conditions are granted free of charge. However, if it is doen through Centre for Engineering Services there is an average fee, four BuildCo's case approximately BYR 1,000,000. 57 Procedure 2 Obtain state ecological expertise of design documentation Time to complete: 20 days Cost to complete: no charge Comment: BuildCo having completed the design documents and drawings applies to the Minsk City Ecological Project Expertise Department for an ecological expertise of all design documents. To obtain the state authority's ecological review, BuildCo must file a brief description of the intended project and required corporate documents. By Resolution #379, as of 20 October 2007 the official time limit is 20 working days. Maximum time-limit is 2 months beyond which no project should be extended. In practice such small scale and no impact projects as BuildCo's would be cleared in 1 week. There is no official fee involved for this procedure. It is expected that beginning 2009 the ecological expertise will be administered by the State Expertise Authority. Thus applicants would not visit separately the Ecological Project Expertise Department. As for commercial warehouse under the existing draft legislation, to be adopted in second half of 2009, there will be no ecological expertise should all zoning requirements are complied with. Procedure 3 Obtain state expertise of design documentation Time to complete: 20 days Cost to complete: BYR 2,700,000 Comment: Upon developing its design documentation, BuildCo submits it to the Minsk City State Expertise Authority for state approval. The state expertise can be conducted in parallel with the ecological expertise. The State Expertise Authority does not look at ecological aspects of construction documents. Although Presidential Decree #676, 16 November 2006 waived state expertise of typical/model constructions, it applies for projects that will have employers working inside the warehouse. Procedure 4 Obtain approval of design documentation Time to complete: 20 days Cost to complete: no charge Comment: After that applicant returns to the Committee of Architecture and City Construction with a completed set of design documents and plans, prepared based on the Architectural and Planning Conditions (APZ). At this stage the Committee approves the Design Documents for Construction (Architectural Plan Approval). Simple cases, as BuildCo's do not require the hearing of City Construction Council chaired by the Head of Committee. The decision is most likely to be made by the Head of Committee of Architecture and City Construction without further consultation. The official time-limit for this procedure is 14 working days. There is no official charge. Procedure 5 Obtain the permit for building on specified land plot Time to complete: 20 days Cost to complete: no charge 58 Comment: Once the Architectural Plan approval is obtained BuildCo needs to apply again to Minsk City Committee of Architecture and City Construction to obtain Permit for Construction on Specified Land Plot. This permit must be issued within 10 working days. It is generally respected by authorities. Procedure 6 Obtain the building permit Time to complete: 10 days Cost to complete: no charge Comment: Once the permit for construction is obtained from Minsk City Committee of Architecture and City Construction, BuildCo applies to Inspection of State Construction Supervision Department of Minsk City (further Inspection) to obtain permit for construction and mounting works. This permit allows companies to begin the actual construction works. As of 29 November 2007, Resolution of Cabinet of Ministers of Belarus provides a time-limit of 10 working days for obtaining the building permit. Previously it would take 40 days. The fee to obtain the building permit is 0.15% of the value of the building and the construction works. This fee is paid for construction supervision works to be done by the Inspection during construction. Before starting construction, BuildCo must pay 50% (planned term of building up to 6 months), 30% (planned term of building 6 to 12 months), or 20% (planned term of building12 months and more) immediately. The balance is paid quarterly or before obtaining the occupancy permit. The payment is done at the bank, and a receipt is submitted to the Inspection. Other supervision mechanisms of construction works must be complied with. Besides the construction supervision by Inspection, BuildCo would have to have an author's supervision (architectural supervision). Technical supervision by a licensed company would be generally required for companies that do not have their own license. For BuidlCo does not need to carry out such works, assuming it is acting as investor and builder at the same time and is building its own project and not for a third party. If no complaints are filed on behalf of neighbours during 6 months of construction BuildCo may never receive inspection from Inspection. Inspection has only 40 inspectors who do both approval of permits and inspections. The average count of sites per inspector is 30 per month. If the inspector shows up BuildCo can continue its works without interruption. Inspector will look at compliance of existing documents and the actual works and records of BuildCo's own inspectors. Once the building is completed BuildCo will submit a written request to the Inspection of State Construction Supervision Department of Minsk City. This inspection happens before the general inspection for it must provides its findings to the attention of other authorities and investors. During the inspection the authority looks at technical passport, author's/architects records and must issue its conclusion within 15 working days. Procedure 7 Apply for electric power connection Time to complete: 1 day Cost to complete: BYR 120,000 Comment: To connect new electrical systems or equipment to the electrical network, BuildCo completes and submits an application form for electric power connection to the electrical network divisions closest to the applicant's place of business. Division personnel will evaluate the application. After the signing of the connection contract or after the connection payment or advance payment, the electrical network division will plan and execute all electrical system work. After BuildCo takes delivery of the internal network, 59 the electrical network inspector will check the electric network connection, seal the calculation chains, and connect the customer's electric system. Procedure 8 Obtain deeds of inspection and testing of engineering networks and systems for the electrical connection structure Time to complete: 1 day Cost to complete: BYR 20,000 Comment: The inspection and testing of the engineering systems and networks is performed by operators of the corresponding engineering networks and systems. It takes about 10 days for the inspectors to come out to the site. Procedure 9 Receive connection to electricity Time to complete: 13 days Cost to complete: no charge Comment: Procedure 10 Apply for telephone connection Time to complete: 1 day Cost to complete: BYR 350,000 Comment: Telephone connections are set during construction. The process normally involves a request, on-site inspection, and installation of a telephone line. The connection fee has been increased in 2008 from BYR 100,000 to BYR 350,000. Procedure 11 Receive on-site inspection for telephone connection Time to complete: 1 day Cost to complete: no charge Comment: Procedure 12 Receive installation of telephone line Time to complete: 5 days Cost to complete: no charge Comment: Procedure 13 Apply for water and sewerage connection Time to complete: 1 day Cost to complete: BYR 310,000 60 Comment: Water and sewerage connections are obtained during construction. The process normally involves a request, on-site inspection, and installation. Procedure 14 Receive on-site inspection and installation for water and sewerage connection Time to complete: 1 day Cost to complete: no charge Comment: Utility and sewerage connections are obtained during construction. The process normally involves a request, on-site inspection, and installation. Procedure 15 Receive installation of water and sewerage connection Time to complete: 5 days Cost to complete: no charge Comment: Procedure 16 Request inspection by the Acceptance Commission and signature of Acceptance Act Time to complete: 21 days Cost to complete: no charge Comment: The Acceptance Commission represents the contractor and building owner, as well as the state fire department authority. On the agreement of these parties, officials of other state agencies can be included in this committee. According to the law the occupancy certificate must be issued within 15 days, but in practice it takes 3 weeks (depending on size of construction and the presence or absence of defects). The Acceptance Commission can come in one day if BuildCo organizes it in such way. Procedure 17 Register the building with Real Estate Registry Time to complete: 73 days Cost to complete: BYR 340,000 Comment: To register the building, upon completing construction, BuildCo must apply to the Registar's Office. The Registar authenticates the documents and issues a decision. The company is subject to property tax, generally 1% (depending on the firm's activities). The statutory time limit for the registration is set at 7 business days (or 14 for complex matters) after documents are submitted and fees are paid. However, in practice, the required time is significantly longer mainly due to shortage of measurement engineers. These professionals must visit the site and measure the new dimensions of new building. Applications for registering a new building and for obtaining ownership title can be done simultaneously; however, separate submissions take less time. 61 Employing Workers in Belarus Employing workers indices are based on responses to survey questions. The table below shows these responses in Belarus. Employing Workers Indicators (2008) Answer Score Rigidity of Employment Index 26.7 Difficulty of Hiring Index 0.0 Are fixed-term contracts prohibited for permanent tasks? No 0 What is the maximum duration of fixed-term contracts (including renewals)? (in months) No limit 0.0 What is the ratio of mandated minimum wage to the average value added per worker? 0.16 0.00 Rigidity of Hours Index 40.0 Can the workweek extend to 50 hours (including overtime) for 2 months per year to Yes 0 respond to a seasonal increase in production? What is the maximum number of working days per week? 6 0 Are there restrictions on night work? Yes 1 Are there restrictions on "weekly holiday" work? Yes 1 What is the paid annual vacation (in working days) for an employee with 20 years of 15 0 service? Difficulty of Firing Index 40.0 Is the termination of workers due to redundancy legally authorized? Yes 0 Must the employer notify a third party before terminating one redundant worker? Yes 1 Does the employer need the approval of a third party to terminate one redundant worker? No 0 Must the employer notify a third party before terminating a group of 25 redundant Yes 1 workers? Does the employer need the approval of a third party to terminate a group of 25 redundant No 0 workers? Is there a retraining or reassignment obligation before an employer can make a worker Yes 1 redundant? Are there priority rules applying to redundancies? Yes 1 Are there priority rules applying to re-employment? No 0 62 Firing costs (weeks of salary) 21.7 What is the notice period for redundancy dismissal after 20 years of continuous 8.7 employment? (weeks of salary) What is the severance pay for redundancy dismissal after 20 years of employment? (weeks of 13.0 salary) What is the legally mandated penalty for redundancy dismissal? (weeks of salary) 0.0 Note: The first three indices measure how difficult it is to hire a new worker, how rigid the regulations are on working hours, and how difficult it is to dismiss a redundant worker. Each index assigns values between 0 and 100, with higher values representing more rigid regulations. The overall Rigidity of Employment Index is an average of the three indices. 63 Registering Property in Belarus This topic examines the steps, time, and cost involved in registering property in Belarus. STANDARDIZED PROPERTY Property Value: 490,340,205.15 City: Minsk Registration Requirements: No: Procedure Time to complete Cost to complete 1 Obtain a non-encumbrance certificate 3 days BYR 42,000 2 Notarization of seller's and buyer's incorporation 1 day BYR 35,000 documents 3 Obtain municipality's approval 7 days no cost 4 The buyer applies to the Registry for registration of the 7-14 days BYR 98,000 sale-purchase agreement and his title to the property 64 Procedure 1 Obtain a non-encumbrance certificate Time to complete: 3 days Cost to complete: BYR 42,000 Comment: The buyer should request from the seller or the Registry an updated extract which allows the buyer to verify the title of the seller, the encumbrances and legal rights attached to the building and the land plot. In addition, parties must obtain from the Registry a certificate confirming connection of the building with the land plot as well as cadastral plans. In 2008 the basic tax unit increased from BYR 31,000 to BYR 42,000. Procedure 2 Notarization of seller's and buyer's incorporation documents Time to complete: 1 day Cost to complete: BYR 35,000 Comment: The seller and buyer notarize the copies of their registration certificates and articles of association. The documentation shall include: Corporate documents of the parties, i.e. charters, foundation agreements, powers of attorney Procedure 3 Obtain municipality's approval Time to complete: 7 days Cost to complete: no cost Comment: The parties submit the signed real estate sales agreement to the municipality for a decision on its first refusal rights. There is no charge. The documentation includes: Application in the established form The copy of sale-purchase agreement Certificate confirming the connection of the building with the land plot Certificate confirming the title of the seller to the property (Must be in possession of the seller) Procedure 4 The buyer applies to the Registry for registration of the sale-purchase agreement and his title to the property Time to complete: 7-14 days Cost to complete: BYR 98,000 Comment: The buyer must apply to the Registry for state registration of the transfer of title. He should produce the original sale agreement as well as the other documents required. The right to own land is very limited in the Republic of Belarus. The overwhelming majority of legal entities in Belarus hold land plots under lease. The rest of them have either permanent use right or (very few) ownership right to land plots. The parties submit the documents obtained in the previous procedures to the Registry. 65 Buyer's application is reviewed by the Registry. The Registrar inspects the authenticity of the presented documents, including verification through the database, makes a decision about registration and issues the certificate about title registration to the new owner. The documentation shall include: Notarized copies of buyer and seller's incorporation documents (obtained in Procedure 2) Sale-purchase agreement Seller's cadastral package of documents (obtained after Procedure 1) Application (in the established form) The contract of lease of land plot between the seller and the City of Minsk (Must be in possession of the seller) The document establishing seller's right of ownership to the building (must be in possession of the seller). Municipality's approval of the transference (Obtained in Procedure 3) 66 Getting Credit in Belarus The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in Belarus. Getting Credit Indicators (2008) Indicator score Private credit Public credit Private bureau coverage (% adults) 5 bureau registry Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative data distributed? No Yes 1 Does the registry distribute credit information from retailers, trade No No 0 creditors or utility companies as well as financial institutions? Are more than 2 years of historical credit information distributed? No Yes 1 Is data on all loans below 1% of income per capita distributed? No Yes 1 Is it guaranteed by law that borrowers can inspect their data in the No Yes 1 largest credit registry? Coverage 0.0 2.4 Number of individuals 0 113,367 Number of firms 0 .. Legal Rights Index 2 Can any business use movable assets as collateral while keeping possession of the assets; and any financial Yes institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of revolving movable No assets, without requiring a specific description of the secured assets ? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without Yes requiring a specific description of the secured assets ? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, No proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations No and debts can be secured by stating a maximum amount rather than a specific amount between the parties ? Is a collateral registry in operation, that is unified georgraphically and by asset type, as well as indexed by the No grantor's name of a security right ? Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? No Do secured creditors have absolute priority to their collateral in bankruptcy procedures? No 67 During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? No Does the law authorize parties to agree on out of court enforcement? No 68 Protecting Investors in Belarus The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are calculated in Belarus. Protecting Investors Data (2008) Indicator Disclosure Index 5 What corporate body provides legally sufficient approval for the transaction? (0-3; see notes) 3 Immediate disclosure to the public and/or shareholders (0-2; see notes) 0 Disclosures in published periodic filings (0-2; see notes) 2 Disclosures by Mr. James to board of directors (0-2; see notes) 0 Requirement that an external body review the transaction before it takes place (0=no, 1=yes) 0 Director Liability Index 1 Shareholder plaintiff's ability to hold Mr. James liable for damage the Buyer-Seller 0 transaction causes to the company. (0-2; see notes) Shareholder plaintiff's ability to hold the approving body (the CEO or board of directors) 0 liable for for damage to the company. (0-2; see notes) Whether a court can void the transaction upon a successful claim by a shareholder plaintiff 0 (0-2; see notes) Whether Mr. James pays damages for the harm caused to the company upon a successful 0 claim by the shareholder plaintiff (0=no, 1=yes) Whether Mr. James repays profits made from the transaction upon a successful claim by the 0 shareholder plaintiff (0=no, 1=yes) Whether fines and imprisonment can be applied against Mr. James (0=no, 1=yes) 0 Shareholder plaintiff's ability to sue directly or derivatively for damage the transaction 1 causes to the company (0-1; see notes) Shareholder Suits Index 8 Documents available to the plaintiff from the defendant and witnesses during trial (0-4; see 4 notes) Ability of plaintiffs to directly question the defendant and witnesses during trial (0-2; see 2 notes) Plaintiff can request categories of documents from the defendant without identifying specific 0 ones (0=no, 1=yes) Shareholders owning 10% or less of Buyer's shares can request an inspector investigate the 1 transaction (0=no, 1=yes) 69 Level of proof required for civil suits is lower than that for criminal cases (0=no, 1=yes) 1 Shareholders owning 10% or less of Buyer's shares can inspect transaction documents before 0 filing suit (0=no, 1=yes) Investor Protection Index 4.7 Notes: Extent of Disclosure Index What corporate body provides legally sufficient approval for the transaction? 0=CEO or managing director alone; 1=shareholders or board of directors vote and Mr. James can vote; 2=board of directors votes and Mr. James cannot vote; 3 = shareholders vote and Mr. James cannot vote Immediate disclosure to the public and/or shareholders 0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest Disclosures in published periodic filings 0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest Disclosures by Mr. James to board of directors 0=none; 1=existence of a conflict without any specifics; 2= full disclosure of all material facts Director Liability Index Shareholder plaintiff's ability to hold Mr. James liable for damage the Buyer-Seller transaction causes to the company 0= Mr. James is not liable or liable only if he acted fraudulently or in bad faith; 1= Mr. James is liable if he influenced the approval or was negligent; 2= Mr. James is liable if the transaction was unfair, oppressive or prejudicial to minority shareholders Shareholder plaintiff's ability to hold the approving body (the CEO or board of directors) liable for for damage to the company 0=members of the approving body are either not liable or liable only if they acted fraudulently or in bad faith; 1=liable for negligence in the approval of the transaction; 2=liable if the transaction is unfair, oppressive, or prejudicial to minority shareholders Whether a court can void the transaction upon a successful claim by a shareholder plaintiff 0=rescission is unavailable or available only in case of Seller's fraud or bad faith; 1=available when the transaction is oppressive or prejudicial to minority shareholders; 2=available when the transaction is unfair or entails a conflict of interest Shareholder plaintiffs' ability to sue directly or derivatively for damage the transaction causes to the company 0=not available; 1=direct or derivative suit available for shareholders holding 10% of share capital or less Shareholder Suits Index Documents available to the plaintiff from the defendant and witnesses during trail Score 1 each for (1) information that the defendant has indicated he intends to rely on for his defense; (2) information that directly proves specific facts in the plaintiff's claim; (3) any information that is relevant to the subject matter of the claim; and (4) any information that may lead to the discovery of relevant information. Ability of plaintiffs to directly question the defendant and witnesses during trial 0=no; 1=yes, with prior approval by the court of the questions posed; 2=yes, without prior approval 70 Paying Taxes in Belarus The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year in Belarus, as well as measures of administrative burden in paying taxes. Tax or mandatory Payments Notes on Time Statutory tax Tax Totaltax rate Notes on contribution (number) Payments (hours) rate base (% profit) TTR Sales tax 12 5.0% sales (including VAT) Value added tax (VAT) 12 48 18.0% value added Obligatory insurance for 12 0.1% gross salaries 0.11 work accidents Land tax 4 per square 0.32 meter Ecological tax 12 mining, fuel 0.34 consumption, etc. Transport tax 12 3.0% taxable profit 1.91 (after corporate income tax) Property tax 12 1.0% residual value 2.14 of fixed assets Corporate income tax 12 960 24.0% taxable profit 20.11 Social security 12 180 35.0% gross salaries 39.48 contributions Turnover tax 12 3.0% turnover 53.03 Totals 112 1188 117.5 71 Notes: a) data not collected b) VAT is not included in the total tax rate because it is a tax levied on consumers c) very small amount d) included in other taxes e) Withheld tax f) electronic filling available g) paid jointly with another tax Name of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. When there is more than one statutory tax rate, the one applicable to TaxpayerCo is reported. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. 72 Trading Across Borders in Belarus These tables list the procedures necessary to import and exports a standardized cargo of goods in Belarus. The documents required to export and import the goods are also shown. Nature of Export Procedures (2008) Duration (days) US$ Cost Documents preparation 9 222 Customs clearance and technical control 4 200 Ports and terminal handling 4 150 Inland transportation and handling 3 1200 Totals 20 1772 Nature of Import Procedures (2008) Duration (days) US$ Cost Documents preparation 12 250 Customs clearance and technical control 5 150 Ports and terminal handling 3 120 Inland transportation and handling 6 1200 Totals 26 1720 Export Bill of lading Cargo release order Certificate of origin Commercial invoice Customs export declaration Packing list Technical standard/health certificate Transit document Import Bill of lading Cargo release order Certificate of origin 73 Commercial invoice Customs import declaration Customs Transit document Packing list Technical standard/health certificate Enforcing Contracts in Belarus This topic looks at the efficiency of contract enforcement in Belarus. Nature of Procedure (2008) Indicator Procedures (number) 28 Duration (days) 225 Filing and service 30.0 Trial and judgment 105.0 Enforcement of judgment 90.0 Cost (% of claim)* 23.38 Attorney cost (% of claim) 12.0 Court cost (% of claim) 11.4 Enforcement Cost (% of claim) 0.0 Court information: Minsk Commercial Court (" ") * Claim assumed to be equivalent to 200% of income per capita. 74 75 76