103373 Regional Profile 2016 Small Island States Doing Business 2016 SMALL ISLAND STATES 2 © 2016 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 18 17 16 15 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2016 SMALL ISLAND STATES 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 23 Getting electricity ....................................................................................................................... 32 Registering property .................................................................................................................. 40 Getting credit .............................................................................................................................. 49 Protecting minority investors ................................................................................................... 57 Paying taxes ................................................................................................................................ 62 Trading across borders .............................................................................................................. 71 Enforcing contracts .................................................................................................................... 85 Resolving insolvency .................................................................................................................. 92 Distance to frontier and ease of doing business ranking ...................................................... 98 Resources on the Doing Business website ............................................................................ 101 Doing Business 2016 SMALL ISLAND STATES 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is comparator regions: Caribbean States, Common Market for a local entrepreneur to open and run a small to for Eastern and Southern Africa (COMESA), East Asia and medium-size business when complying with relevant the Pacific (EAP), Latin America and Southern African regulations. It measures and tracks changes in Development Community (SADC).. The data in this regulations affecting 11 areas in the life cycle of a report are current as of June 1, 2015 (except for the business: starting a business, dealing with construction paying taxes indicators, which cover the period January– permits, getting electricity, registering property, getting December 2014). credit, protecting minority investors, paying taxes, The Doing Business methodology has limitations. Other trading across borders, enforcing contracts, resolving areas important to business—such as an economy’s insolvency and labor market regulation. Doing Business proximity to large markets, the quality of its 2016 presents the data for the labor market regulation infrastructure services (other than those related to indicators in an annex. The report does not present trading across borders and getting electricity), the rankings of economies on labor market regulation security of property from theft and looting, the indicators or include the topic in the aggregate distance transparency of government procurement, to frontier score or ranking on the ease of doing macroeconomic conditions or the underlying strength of business. institutions—are not directly studied by Doing Business. In a series of annual reports Doing Business presents The indicators refer to a specific type of business, quantitative indicators on business regulations and the generally a local limited liability company operating in protection of property rights that can be compared the largest business city. Because standard assumptions across 189 economies, from Afghanistan to Zimbabwe, are used in the data collection, comparisons and over time. The data set covers 47 economies in Sub- benchmarks are valid across economies. The data not Saharan Africa, 32 in Latin America and the Caribbean, 25 only highlight the extent of obstacles to doing business; in East Asia and the Pacific, 25 in Eastern Europe and they also help identify the source of those obstacles, Central Asia, 20 in the Middle East and North Africa and supporting policy makers in designing regulatory reform. 8 in South Asia, as well as 32 OECD high-income More information is available in the full report. Doing economies. The indicators are used to analyze economic Business 2016 presents the indicators, analyzes their outcomes and identify what reforms have worked, where relationship with economic outcomes and recommends and why. regulatory reforms. The data, along with information on This regional profile presents the Doing Business ordering the Doing Business 2016 report, are available on indicators for economies in Small Island States. It also the Doing Business website at shows the regional average, the best performance http://www.doingbusiness.org. globally for each indicator and data for the following Doing Business 2016 SMALL ISLAND STATES 5 THE BUSINESS ENVIRONMENT CHANGES IN DOING BUSINESS 2016 As part of a two-year update in methodology, Doing The case study underlying the trading across borders Business 2016 expands the focus of five indicator sets indicators has been changed to increase its relevance. (dealing with construction permits, getting electricity, For each economy the export product and partner are registering property, enforcing contracts and labor now determined on the basis of the economy’s market regulation), substantially revises the comparative advantage, the import product is auto parts, methodology for one indicator set (trading across and the import partner is selected on the basis of which borders) and implements small updates to the economy has the highest trade value in that product. The methodology for another (protecting minority investors). indicators continue to measure the time and cost to export and import. The indicators on dealing with construction permits now include an index of the quality of building regulation and Beyond these changes there is one other update in its implementation. The getting electricity indicators now methodology, for the protecting minority investors include a measure of the price of electricity consumption indicators. A few points for the extent of shareholder and an index of the reliability of electricity supply and governance index have been fine-tuned, and the index transparency of tariffs. Starting this year, the registering now also measures aspects of the regulations applicable property indicators include an index of the quality of the to limited companies rather than privately held joint land administration system in each economy in addition stock companies. to the indicators on the number of procedures and the For more details on the changes, see the “What is time and cost to transfer property. And for enforcing changing in Doing Business?” chapter starting on page contracts an index of the quality and efficiency of judicial 27 of the Doing Business 2016 report. For more details processes has been added while the indicator on the on the data and methodology, please see the “Data number of procedures to enforce a contract has been Notes” chapter starting on page 119 of the Doing dropped. Business 2016 report. For more details on the distance to The scope of the labor market regulation indicator set frontier metric, please see the “Distance to frontier and has also been expanded, to include more areas capturing ease of doing business ranking” chapter in this profile. aspects of job quality. The labor market regulation indicators continue to be excluded from the aggregate distance to frontier score and ranking on the ease of doing business. Doing Business 2016 SMALL ISLAND STATES 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s permits, getting electricity, registering property, regulatory environment for business, a good place to getting credit, protecting minority investors, paying start is to find out how it compares with the regulatory taxes, trading across borders, enforcing contracts environment in other economies. Doing Business and resolving insolvency. The labor market provides an aggregate ranking on the ease of doing regulation indicators are not included in this year’s business based on indicator sets that measure and aggregate ease of doing business ranking, but the benchmark regulations applying to domestic small to data are presented in the economy profile. medium-size businesses through their life cycle. The ease of doing business ranking compares Economies are ranked from 1 to 189 by the ease of economies with one another; the distance to frontier doing business ranking. Doing Business presents results score benchmarks economies with respect to for 2 aggregate measures: the distance to frontier score regulatory best practice, showing the absolute and the ease of doing business ranking. The ranking of distance to the best performance on each Doing economies is determined by sorting the aggregate Business indicator. When compared across years, the distance to frontier scores, rounded to two decimals. An distance to frontier score shows how much the economy’s distance to frontier score is indicated on a regulatory environment for local entrepreneurs in an scale from 0 to 100, where 0 represents the worst economy has changed over time in absolute terms, performance and 100 the frontier. (See the chapter on while the ease of doing business ranking can show the distance to frontier and ease of doing business). only how much the regulatory environment has The 10 topics included in the ranking in Doing Business changed relative to that in other economies. 2016: starting a business, dealing with construction Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy stands in regional average (figure 1.2). Another perspective is the aggregate ranking on the ease of doing business is provided by the regional average rankings on the topics useful. Also useful is to know how it ranks compared with included in the ease of doing business ranking (figure 1.3) other economies in the region and compared with the and the distance to frontier scores (figures 1.4 and 1.5). Figure 1.2 How economies in Small Island States rank on the ease of doing business Note: The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population- weighted average for the 2 cities. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 8 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Small Island States (Scale: Rank 189 center, Rank 1 outer edge) Regional average ranking Source: Doing Business database. Figure 1.4 Distance to frontier scores on Doing Business topics - Small Island States (Scale: Score 0 center, Score 100 outer edge) Note: The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respec t to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 9 Figure 1.5 How far has Small Island States come in the areas measured by Doing Business? Source: Doing Business database. Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits, registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are only comparable to 2014. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 119 of the Doing Business 2016 report for more details on the distance to frontier score. Doing Business 2016 SMALL ISLAND STATES 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business The absolute values of the indicators tell another part of tells only part of the story, so do changes in that ranking. the story (table 1.1). Policy makers can learn much by Yearly movements in rankings can provide some comparing the indicators for their economy with those indication of changes in an economy’s regulatory for the lowest- and highest-scoring economies in the environment for firms, but they are always relative. An region as well as those for the best performers globally. economy’s ranking might change because of These comparisons may reveal unexpected strengths in developments in other economies. An economy that an area of business regulation—such as a regulatory implemented business regulation reforms may fail to rise process that can be completed with a small number of in the rankings (or may even drop) if it is passed by procedures in a few days and at a low cost. others whose business regulation reforms had a more significant impact as measured by Doing Business. Table 1.1 Summary of Doing Business indicators for Small Island States Lowest regional Best regional Best global Indicator Regional average performance performance performance Starting a Business 188 (Haiti) 9 (Jamaica) 95 1 (New Zealand) (rank) Starting a Business 33.53 (Haiti) 97.28 (Jamaica) 82.75 99.96 (New Zealand) (DTF Score) Procedures (number) 12.0 (Haiti) 2.0 (Jamaica) 6.5 1.0 (New Zealand*) Time (days) 97.0 (Haiti) 2.5 (Singapore) 20.9 0.5 (New Zealand) Cost (% of income per 235.3 (Haiti) 0.3 (Timor-Leste) 28.4 0.0 (Slovenia) capita) Paid-in min. capital (% 156.6 (Timor-Leste) 0.0 (23 Economies*) 8.9 0.0 (105 Economies*) of income per capita) Dealing with Construction Permits 167 (Haiti) 1 (Singapore) 94 1 (Singapore) (rank) Dealing with Construction Permits 52.86 (Haiti) 92.97 (Singapore) 68.22 92.97 (Singapore) (DTF Score) Procedures (number) 19.0 (Palau) 7.0 (Marshall Islands) 13.7 7.0 (5 Economies*) Time (days) 442.0 (Barbados) 26.0 (Singapore) 134.6 26.0 (Singapore) Cost (% of warehouse 15.7 (Haiti) 0.1 (3 Economies*) 1.7 0.0 (Qatar) value) Building quality control 0.0 (Micronesia, Fed. 14.0 (Singapore) 7.0 15.0 (New Zealand) index (0-15) Sts.) Getting Electricity 173 (Kiribati) 6 (Singapore) 90 1 (Korea, Rep.) (rank) Doing Business 2016 SMALL ISLAND STATES 11 Lowest regional Best regional Best global Indicator Regional average performance performance performance Getting Electricity 37.96 (Kiribati) 94.34 (Singapore) 67.79 99.88 (Korea, Rep.) (DTF Score) Procedures (number) 7.0 (4 Economies*) 3.0 (4 Economies*) 4.7 3.0 (14 Economies*) Time (days) 137.0 (Seychelles) 18.0 (St. Kitts and Nevis) 74.0 18.0 (Korea, Rep.*) Cost (% of income per 5,169.3 (Kiribati) 25.9 (Singapore) 754.5 0.0 (Japan) capita) Reliability of supply and transparency of 0.0 (14 Economies*) 8.0 (Singapore) 2.7 8.0 (18 Economies*) tariff index (0-8) Registering Property 189 (3 Economies*) 17 (Singapore) 126 1 (New Zealand) (rank) Registering Property 0.00 (3 Economies*) 85.66 (Singapore) 49.42 94.46 (New Zealand) (DTF Score) Procedures (number) 10.0 (Solomon Islands) 4.0 (8 Economies*) 5.9 1.0 (4 Economies*) Time (days) 513.0 (Kiribati) 4.5 (Singapore) 75.7 1.0 (3 Economies*) Cost (% of property 15.9 (Maldives) 0.0 (Kiribati) 7.6 0.0 (Saudi Arabia) value) Quality of the land administration index 0.0 (3 Economies*) 26.5 (Singapore) 10.6 28.5 (3 Economies*) (0-30) 185 (São Tomé and Getting Credit (rank) 7 (Jamaica) 110 1 (New Zealand) Príncipe) Getting Credit (DTF 0.00 (São Tomé and 85.00 (Jamaica) 38.87 100.00 (New Zealand) Score) Príncipe) Strength of legal rights 11.0 (Micronesia, Fed. 0.0 (Timor-Leste*) 5.5 12.0 (3 Economies*) index (0-12) Sts.) Depth of credit 8.0 (Dominican 0.0 (18 Economies*) 2.3 8.0 (26 Economies*) information index (0-8) Republic) Credit registry 1.6 (Haiti) 82.6 (Mauritius) 6.5 100.0 (Portugal) coverage (% of adults) Credit bureau coverage 3.5 (Papua New Guinea) 82.4 (Fiji) 10.6 100.0 (22 Economies*) (% of adults) Protecting Minority 187 (Haiti) 1 (Singapore) 106 1 (3 Economies*) Investors (rank) Protecting Minority 20.00 (Haiti) 83.33 (Singapore) 48.28 83.33 (3 Economies*) Investors (DTF Score) Strength of minority 2.0 (Haiti) 8.3 (Singapore) 4.8 8.3 (3 Economies*) investor protection Doing Business 2016 SMALL ISLAND STATES 12 Lowest regional Best regional Best global Indicator Regional average performance performance performance index (0-10) Extent of conflict of interest regulation 2.3 (Palau) 9.3 (Singapore) 5.5 9.3 (Singapore*) index (0-10) Extent of shareholder governance index (0- 1.0 (Haiti) 7.3 (Singapore) 4.2 8.0 (4 Economies*) 10) 1 (United Arab Paying Taxes (rank) 167 (Comoros) 5 (Singapore) 95 Emirates*) Paying Taxes (DTF 99.44 (United Arab 47.37 (Comoros) 96.56 (Singapore) 72.09 Score) Emirates*) Payments (number per 57.0 (Antigua and 3.0 (Hong Kong SAR, 6.0 (Singapore) 28.9 year) Barbuda) China*) 424.0 (São Tomé and Time (hours per year) 58.0 (Bahamas, The) 182.7 55.0 (Luxembourg) Príncipe) Total tax rate (% of 216.5 (Comoros) 8.5 (Vanuatu) 42.0 25.9 (Ireland) profit) Trading Across 163 (Papua New 39 (Malta) 98 1 (16 Economies*) Borders (rank) Guinea) Trading Across 42.28 (Papua New 90.72 (Malta) 68.42 100.00 (16 Economies*) Borders (DTF Score) Guinea) Time to export: Border 121 (São Tomé and 3 (St. Kitts and Nevis) 54 0 (15 Economies*) compliance (hours) Príncipe) Cost to export: Border 168 (Micronesia, Fed. 1,400 (Samoa) 460 0 (18 Economies*) compliance (USD) Sts.) Time to export: Documentary 168 (Palau*) 3 (Malta*) 46 0 (Jordan) compliance (hours) Cost to export: Documentary 1,050 (Samoa) 0 (Malta) 171 0 (20 Economies*) compliance (USD) Time to import: Border 156 (São Tomé and 2 (Malta) 67 0 (19 Economies*) compliance (hours) Príncipe) Cost to import: Border 168 (Micronesia, Fed. 1,745 (Grenada) 625 0 (28 Economies*) compliance (USD) Sts.) Time to import: Documentary 168 (Palau) 1 (Singapore*) 44 1 (21 Economies*) compliance (hours) Cost to import: 800 (Samoa) 37 (Singapore) 155 0 (30 Economies*) Doing Business 2016 SMALL ISLAND STATES 13 Lowest regional Best regional Best global Indicator Regional average performance performance performance Documentary compliance (USD) Enforcing Contracts 189 (Timor-Leste) 1 (Singapore) 103 1 (Singapore) (rank) Enforcing Contracts 6.13 (Timor-Leste) 84.91 (Singapore) 53.01 84.91 (Singapore) (DTF Score) Time (days) 1,340.0 (Barbados*) 150.0 (Singapore) 633.0 150.0 (Singapore) Cost (% of claim) 163.2 (Timor-Leste) 15.4 (Seychelles) 42.6 9.0 (Iceland) Quality of judicial 2.5 (Timor-Leste) 15.5 (Singapore) 8.2 15.5 (3 Economies*) processes index (0-18) Resolving Insolvency 189 (8 Economies*) 27 (Singapore) 127 1 (Finland) (rank) Resolving Insolvency 0.00 (8 Economies*) 74.83 (Singapore) 30.41 93.81 (Finland) (DTF Score) Recovery rate (cents on 3.2 (Micronesia, Fed. 89.7 (Singapore) 27.9 92.9 (Japan) the dollar) Sts.) 6.2 (São Tomé and Time (years) 0.8 (Singapore) 2.5 0.4 (Ireland) Príncipe) Cost (% of estate) 38.0 (6 Economies*) 3.0 (Singapore) 20.3 1.0 (Norway) Strength of insolvency 11.5 (Micronesia, Fed. 0.0 (Marshall Islands*) 4.9 15.0 (4 Economies*) framework index (0-16) Sts.) * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Note: The global best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2016 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 14 STARTING A BUSINESS WHAT THE STARTING A BUSINESS Formal registration of companies has many INDICATORS MEASURE immediate benefits for the companies and for business owners and employees. Legal entities can Procedures to legally start and operate a outlive their founders. Resources are pooled as company (number) several shareholders join forces to start a company. Formally registered companies have access to Preregistration (for example, name services and institutions from courts to banks as well verification or reservation, notarization) as to new markets. And their employees can benefit Registration in the economy’s largest from protections provided by the law. An additional business city 1 benefit comes with limited liability companies. These Postregistration (for example, social security limit the financial liability of company owners to their registration, company seal) investments, so personal assets of the owners are not put at risk. Where governments make registration Time required to complete each procedure easy, more entrepreneurs start businesses in the (calendar days) formal sector, creating more good jobs and Does not include time spent gathering generating more revenue for the government. information What do the indicators cover? Each procedure starts on a separate day (2 procedures cannot start on the same day). Doing Business measures the ease of starting a Procedures that can be fully completed business in an economy by recording all procedures online are recorded as ½ day. officially required or commonly done in practice by an entrepreneur to start up and formally operate an Procedure completed once final document is industrial or commercial business—as well as the received time and cost required to complete these procedures. No prior contact with officials It also records the paid-in minimum capital that Cost required to complete each procedure companies must deposit before registration (or (% of income per capita) within 3 months). The ranking of economies on the ease of starting a business is determined by sorting Official costs only, no bribes their distance to frontier scores for starting a No professional fees unless services required business. These scores are the simple average of the by law distance to frontier scores for each of the component indicators. Paid-in minimum capital (% of income per capita) To make the data comparable across economies, Doing Business uses several assumptions about the Deposited in a bank or with a notary before business and the procedures. It assumes that all registration (or within 3 months) information is readily available to the entrepreneur  Conducts general commercial or industrial and that there has been no prior contact with activities. officials. It also assumes that the entrepreneur will pay no bribes. And it assumes that the business:  Has a start-up capital of 10 times income per capita.  Is a limited liability company, located in the largest business city , is 100% domestically 1  Has a turnover of at least 100 times income per owned with between 10 and 50 employees. capita.  Does not qualify for any special benefits.  Does not own real estate. For the 11 economies with a population of more than 100 million, data for a second city have been added. 1 Doing Business 2016 SMALL ISLAND STATES 15 STARTING A BUSINESS Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in Small suggest an answer (figure 2.1). The average ranking of Island States to start a business? The global rankings of the region and comparator regions provide a useful these economies on the ease of starting a business benchmark. Figure 2.1 How economies in Small Island States rank on the ease of starting a business Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 16 STARTING A BUSINESS The indicators underlying the rankings may be more and the paid-in minimum capital requirement (figure revealing. Data collected by Doing Business show what 2.2). Comparing these indicators across the region and it takes to start a business in each economy in the with averages both for the region and for comparator region: the number of procedures, the time, the cost regions can provide useful insights. Figure 2.2 What it takes to start a business in economies in Small Island States Procedures (number) Doing Business 2016 SMALL ISLAND STATES 17 STARTING A BUSINESS Time (days) Doing Business 2016 SMALL ISLAND STATES 18 STARTING A BUSINESS Cost (% of income per capita) Doing Business 2016 SMALL ISLAND STATES 19 STARTING A BUSINESS Paid-in minimum capital (% of income per capita) Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 20 STARTING A BUSINESS What are the changes over time? Economies around the world have taken steps making it often as part of a larger regulatory reform program. easier to start a business—streamlining procedures by Among the benefits have been greater firm satisfaction setting up a one-stop shop, making procedures simpler and savings and more registered businesses, financial or faster by introducing technology, and reducing or resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in Small Island States (table 2.1)? Table 2.1 How have economies in Small Island States made starting a business easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform The Bahamas made starting a business more difficult by DB2016 Bahamas, The adding a requirement for value added tax (VAT) registration. The Comoros made starting a business easier by reducing the DB2016 Comoros minimum capital requirement. Jamaica made starting a business easier by streamlining DB2016 Jamaica internal procedures. Jamaica made starting a business easier by consolidating forms, but also made it more time-consuming as a result of DB2015 Jamaica delays in the implementation of the electronic interface with different agencies. Malta made starting a business easier by creating an electronic link between the Registrar of Companies and the DB2015 Malta Inland Revenue Department to facilitate issuance of a tax identification number. Mauritius made starting a business easier by reducing trade DB2015 Mauritius license fees. São Tomé and Príncipe made starting a business easier by DB2015 São Tomé and Príncipe eliminating the minimum capital requirement for business entities with no need to obtain a commercial license. Timor-Leste made starting a business easier by creating a DB2015 Timor-Leste one-stop shop. Trinidad and Tobago made starting a business easier by DB2015 Trinidad and Tobago introducing online systems for employer registration and tax registration. The Comoros made starting a business easier by eliminating DB2014 Comoros the requirement to deposit the minimum capital in a bank before incorporation. Doing Business 2016 SMALL ISLAND STATES 21 DB year Economy Reform Cape Verde made starting a business easier by abolishing the DB2014 Cabo Verde minimum capital requirement. Jamaica made starting a business easier by enabling the DB2014 Jamaica Companies Office of Jamaica to stamp the new company’s articles of incorporation at registration. Trinidad and Tobago made starting a business easier by DB2014 Trinidad and Tobago merging the statutory declaration of compliance into the standard articles of incorporation form. The Comoros made starting a business easier and less costly by replacing the requirement for a copy of the founders’ DB2013 Comoros criminal records with one for a sworn declaration at the time of the company’s registration and by reducing the fees to incorporate a company. Fiji made starting a business more difficult by requiring new companies applying for a business license to obtain a DB2013 Fiji certificate from the national fire authority and a letter of compliance from the Ministry of Labor. Comoros made the process of starting a business more DB2012 Comoros difficult by increasing the minimum capital requirement. The Dominican Republic made starting a business easier by DB2012 Dominican Republic eliminating the requirement for a proof of deposit of capital when establishing a new company. Fiji made starting a business more difficult by adding a DB2012 Fiji requirement to obtain a tax identification number when registering a new company. São Tomé and Príncipe made starting a business easier by establishing a one-stop shop, eliminating the requirement for DB2012 São Tomé and Príncipe an operating license for general commercial companies and simplifying publication requirements. The Solomon Islands made starting a business easier by DB2012 Solomon Islands implementing an online registration process. Tonga made starting a business easier by implementing an electronic system at the registry, which reduced the time required for verification of the uniqueness of the company DB2012 Tonga name and for registration of the company. The costs for the name search, company registration and business license increased, however. Vanuatu made starting a business easier by reducing the time required for company registration at the Vanuatu Financial DB2012 Vanuatu Services Commission and issuing provisional licenses at the Department of Customs. Timor-Leste made starting a business faster by improving the DB2012 Timor-Leste registration process. São Tomé and Principe made starting a business more DB2011 São Tomé and Príncipe difficult by introducing a minimum capital requirement for Doing Business 2016 SMALL ISLAND STATES 22 DB year Economy Reform limited liability companies. Cape Verde made business start-up easier by eliminating the need for a municipal inspection before a business begins DB2011 Cabo Verde operations and computerizing the system for delivering the municipal license. The Dominican Republic made it more difficult to start a business by setting a minimum capital requirement of DB2011 Dominican Republic 100,000 Dominican pesos ($2,855) for its new type of company, sociedad de responsabilidad limitada (limited liability company). Grenada eased business start-up by transferring responsibility DB2011 Grenada for the commercial registry from the courts to the civil administration. Haiti eased business start-up by eliminating the review by the DB2011 Haiti president’s or the prime minister’s office of the incorporation act submitted for publication. Samoa made starting a business easier by eliminating the DB2010 Samoa minimum capital requirement and simplifying some procedures. Cape Verde made starting a business easier by implementing DB2010 Cabo Verde an online company registration system. St. Lucia made starting a business easier by implementing an DB2010 St. Lucia electronic registration system that allows entrepreneurs to check the availability of and reserve company names online. St. Vincent and the Grenadines made starting a business DB2010 St. Vincent and the Grenadines easier by abolishing the requirement for a physical company seal. Singapore made starting a business easier by combining tax DB2010 Singapore registration with business registration on a single online form. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 23 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse (number) many builders opt out. They may pay bribes to pass inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water and Doing Business records all procedures required for a sewerage business in the construction industry to build a warehouse along with the time and cost to complete Registering and selling the warehouse after its each procedure. In addition, this year Doing Business completion introduces a new measure, the building quality Time required to complete each procedure control index, evaluating the quality of building (calendar days) regulations, the strength of quality control and safety Does not include time spent gathering mechanisms, liability and insurance regimes, and information professional certification requirements. Each procedure starts on a separate day. The ranking of economies on the ease of dealing with Procedures that can be fully completed online construction permits is determined by sorting their are recorded as ½ day distance to frontier scores for dealing with construction permits. These scores are the simple Procedure considered completed once final document is received average of the distance to frontier scores for each of the component indicators. No prior contact with officials To make the data comparable across economies, Cost required to complete each procedure (% several assumptions about the construction of warehouse value) company, the warehouse project and the utility Official costs only, no bribes connections are used. Assumptions about the construction company Building quality control index (0-15) Sum of the scores of six component indices: The construction company (BuildCo): Quality of building regulations (0-2)  Is a limited liability company (or its legal equivalent). Quality control before construction (0-1)  Operates in the economy’s largest business Quality control during construction (0-3) city. For 11 economies the data are also Quality control after construction (0-3) collected for the second largest business city. Liability and insurance regimes (0-2)  Is 100% domestically and privately owned Professional certifications (0-4) with five owners, none of whom is a legal entity.  Is fully licensed and insured to carry out construction projects, such as building warehouses. Doing Business 2016 SMALL ISLAND STATES 24 The construction company (BuildCo) (continued):  Has 60 builders and other employees, all of  Will be a new construction (there was no them nationals with the technical expertise previous construction on the land), with no and professional experience necessary to trees, natural water sources, natural reserves obtain construction permits and approvals. or historical monuments of any kind on the plot.  Has at least one employee who is a licensed architect or engineer and  Will have complete architectural and registered with the local association of technical plans prepared by a licensed architects or engineers. BuildCo is not architect. If preparation of the plans requires assumed to have any other employees who such steps as obtaining further are technical or licensed experts, such as documentation or getting prior approvals geological or topographical experts. from external agencies, these are counted as procedures.  Has paid all taxes and taken out all necessary insurance applicable to its  Will include all technical equipment required general business activity (for example, to be fully operational. accidental insurance for construction  Will take 30 weeks to construct (excluding all workers and third-person liability). delays due to administrative and regulatory  Owns the land on which the warehouse will requirements). be built and will sell the warehouse upon Assumptions about the utility connections its completion. The water and sewerage connections:  Is valued at 50 times income per capita. • Will be 150 meters (492 feet) from the Assumptions about the warehouse existing water source and sewer tap. If there is no water delivery infrastructure in the economy, a  The warehouse: borehole will be dug. If there is no sewerage  Will be used for general storage activities, infrastructure, a septic tank in the smallest size such as storage of books or stationery. The available will be installed or built. warehouse will not be used for any goods  Will not require water for fire protection requiring special conditions, such as food, reasons; a fire extinguishing system (dry chemicals or pharmaceuticals. system) will be used instead. If a wet fire  Will have two stories, both above ground, protection system is required by law, it is with a total constructed area of assumed that the water demand specified approximately 1,300.6 square meters below also covers the water needed for fire (14,000 square feet). Each floor will be 3 protection. meters (9 feet, 10 inches) high.  Will have an average water use of 662 liters  Will have road access and be located in the (175 gallons) a day and an average periurban area of the economy’s largest wastewater flow of 568 liters (150 gallons) a business city (that is, on the fringes of the day. Will have a peak water use of 1,325 liters city but still within its official limits). For 11 (350 gallons) a day and a peak wastewater economies the data are also collected for flow of 1,136 liters (300 gallons) a day. the second largest business city.  Will have a constant level of water demand • Will not be located in a special economic and wastewater flow throughout the year. or industrial zone. Will be located on a land  Will be 1 inch in diameter for the water plot of approximately 929 square meters connection and 4 inches in diameter for the (10,000 square feet) that is 100% owned by sewerage connection. BuildCo and is accurately registered in the cadastre and land registry. Doing Business 2016 SMALL ISLAND STATES 25 DEALING WITH CONSTRUCTION PERMITS Where do the region’s economies stand today? How easy it is for entrepreneurs in economies in Small construction permits suggest an answer (figure 3.1). The Island States to legally build a warehouse? The global average ranking of the region and comparator regions rankings of these economies on the ease of dealing with provide a useful benchmark. Figure 3.1 How economies in Small Island States rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 26 DEALING WITH CONSTRUCTION PERMITS The indicators underlying the rankings may be more the time and the cost (figure 3.2). Comparing these revealing. Data collected by Doing Business show what it indicators across the region and with averages both for takes to comply with formalities to build a warehouse in the region and for comparator regions can provide each economy in the region: the number of procedures, useful insights. Figure 3.2 What it takes to comply with formalities to build a warehouse in economies in Small Island States Procedures (number) Doing Business 2016 SMALL ISLAND STATES 27 DEALING WITH CONSTRUCTION PERMITS Time (days) Doing Business 2016 SMALL ISLAND STATES 28 DEALING WITH CONSTRUCTION PERMITS Cost (% of warehouse value) * Indicates a “no practice” mark. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 29 DEALING WITH CONSTRUCTION PERMITS Building Quality Control Index (0-15) * Indicates a “no practice” mark. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Note: The index ranges from 0 to 15, with higher values indicating better quality control and safety mechanisms in the construction permitting system. The indicator is based on the same case study assumptions as the measures of efficiency. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 30 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? Smart regulation ensures that standards are met while compliance costs reasonable, governments around the making compliance easy and accessible to all. Coherent world have worked on consolidating permitting and transparent rules, efficient processes and adequate requirements. What construction permitting reforms has allocation of resources are especially important in sectors Doing Business recorded in Small Island States (table where safety is at stake. Construction is one of them. In 3.1)? an effort to ensure building safety while keeping Table 3.1 How have economies in Small Island States made dealing with construction permits easier —or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Jamaica made dealing with construction permits easier by DB2016 Jamaica implementing a new workflow for processing building permit applications. The Maldives made dealing with construction permits more difficult by requiring that building plans be stamped and DB2016 Maldives approved by private structural and architectural checkers prior to requesting a building permit. In Mauritius the time required for dealing with construction DB2016 Mauritius permits was reduced by the hiring of a more efficient subcontractor to establish sewerage connections. The Bahamas made dealing with construction permits more DB2015 Bahamas, The costly by increasing the building permit fees. The Dominican Republic made dealing with construction DB2015 Dominican Republic permits more costly by increasing the building permit fees. St. Kitts and Nevis made dealing with construction permits DB2015 St. Kitts and Nevis more costly by increasing the building permit fees. Samoa made dealing with construction permits more costly DB2015 Samoa by increasing the building permit fees. Malta made dealing with construction permits less costly by DB2014 Malta significantly reducing the building permit fees. Fiji made obtaining a construction permit more expensive by DB2013 Fiji implementing a fee for the fire department clearance. São Tomé and Príncipe made obtaining a construction DB2013 São Tomé and Príncipe permit more expensive by increasing the fees. Doing Business 2016 SMALL ISLAND STATES 31 DB year Economy Reform Vanuatu made obtaining a construction permit more cumbersome by making a preliminary environmental DB2013 Vanuatu assessment mandatory and made it more expensive by increasing the fees. Trinidad and Tobago made dealing with construction DB2012 Trinidad and Tobago permits costlier by increasing the fees for building permit approvals. Vanuatu made dealing with construction permits more DB2012 Vanuatu difficult by increasing the number of procedures and the cost to obtain a building permit. Haiti made dealing with construction permits costlier by DB2012 Haiti increasing the fees to obtain a building permit. São Tomé and Príncipe made dealing with construction DB2012 São Tomé and Príncipe permits easier by reducing the time required to process building permit applications. Singapore made dealing with construction permits easier through new workplace safety and health regulations DB2010 Singapore allowing companies in low-risk industries to submit documents online. The cost of dealing with construction permits increased DB2010 Solomon Islands significantly in the Solomon Islands as a result of fee increases and high prices for construction materials. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 32 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely on INDICATORS MEASURE self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity connection first step for a customer is always to gain access by (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized Obtaining external installation works and warehouse, as well as the time and cost to complete possibly purchasing material for these works them. These procedures include applications and Concluding any necessary supply contract and contracts with electricity utilities, clearances from obtaining final supply other agencies and the external and final connection works. In addition, this year Doing Business adds Time required to complete each procedure two new measures: the reliability of supply and (calendar days) transparency of tariffs index (included in the Is at least 1 calendar day aggregate distance to frontier score and ranking on Each procedure starts on a separate day the ease of doing business) and the price of electricity (omitted from these aggregate measures). Does not include time spent gathering The ranking of economies on the ease of getting information electricity is determined by sorting their distance to Reflects the time spent in practice, with little frontier scores for getting electricity. These scores follow-up and no prior contact with officials are the simple average of the distance to frontier Cost required to complete each procedure (% scores for each of the component indicators. To of income per capita) make the data comparable across economies, several assumptions are used. Official costs only, no bribes Assumptions about the warehouse Excludes value added tax The reliability of supply and transparency of The warehouse: tariffs index  Is owned by a local entrepreneur. Sum of the scores of six component indices:  Is located in the economy’s largest business Duration and frequency of outages city. For 11 economies the data are also collected for the second largest business city. Tools to monitor power outages  Is located in an area where similar warehouses Tools to restore power supply are typically located. In this area a new Regulatory monitoring of utilities’ performance electricity connection is not eligible for a Financial deterrents aimed at limiting outages special investment promotion regime (offering special subsidization or faster service, for Transparency and accessibility of tariffs example), and located in an area with no Price of electricity (cents per kilowatt-hour)* physical constraints. For example, the property Price based on monthly bill for commercial is not near a railway. warehouse in case study  Is a new construction and is being connected *Price of electricity is not included in the calculation of to electricity for the first time. distance to frontier nor ease of doing business ranking Doing Business 2016 SMALL ISLAND STATES 33 The warehouse (continued):  Has two stories, both above ground, with Assumptions about the monthly consumption a total surface area of approximately  It is assumed that the warehouse operates 8 1,300.6 square meters (14,000 square hours a day for 30 days a month, with feet). The plot of land on which it is built equipment utilized at 80% of capacity on is 929 square meters (10,000 square feet). average, and that there are no electricity cuts  Is used for storage of goods. (assumed for simplicity). The subscribed capacity of the warehouse is 140 kVA, with a power factor of 1 (1 kVA = 1 kW). The monthly Assumptions about the electricity connection energy consumption is therefore 26,880 kWh, and the hourly consumption 112 kWh (26,880 The electricity connection: kWh/30 days/8 hours).  Is a permanent one.  If multiple electricity suppliers exist, the  Is a three-phase, four-wire Y, 140-kilovolt- warehouse is served by the cheapest supplier. ampere (kVA) (subscribed capacity) connection (where the voltage is 120/208  Tariffs effective in March of the current year are used for calculation of the price of V, the current would be 400 amperes; electricity for the warehouse. where it is 230/400 B, the current would be nearly 200 amperes).  Is 150 meters long. The connection is to either the low-voltage or the medium- voltage distribution network and either overhead or underground, whichever is more common in the area where the warehouse is located.  Requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.  Includes only a negligible length in the customer’s private domain.  Will supply monthly electricity consumption of 26,880 kilowatt-hours (kWh).  Does not involve work to install the internal electrical wiring. This has already been completed, up to and including the customer’s service panel or switchboard and installation of the meter base. Doing Business 2016 SMALL ISLAND STATES 34 GETTING ELECTRICITY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in Small average ranking of the region and comparator regions Island States to connect a warehouse to electricity? The provide a useful benchmark. global rankings of these economies on the ease of getting electricity suggest an answer (figure 4.1). The Figure 4.1 How economies in Small Island States rank on the ease of getting electricity Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 35 GETTING ELECTRICITY The indicators underlying the rankings may be more time and the cost (figure 4.2). Comparing these revealing. Data collected by Doing Business show what it indicators across the region and with averages both for takes to get a new electricity connection in each the region and for comparator regions can provide economy in the region: the number of procedures, the useful insights. Figure 4.2 What it takes to get an electricity connection in economies in Small Island States Procedures (number) Doing Business 2016 SMALL ISLAND STATES 36 GETTING ELECTRICITY Time (days) Doing Business 2016 SMALL ISLAND STATES 37 GETTING ELECTRICITY Cost (% of income per capita) Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 38 GETTING ELECTRICITY Reliability of supply and transparency of tariff index (0-8) Source: Doing Business database. Note: The index ranges from 0 to 8, with higher values indicating greater reliability of electricity supply and greater transparency of tariffs. Doing Business 2016 SMALL ISLAND STATES 39 GETTING ELECTRICITY What are the changes over time? Obtaining an electricity connection is essential to enable ensure safety in the connection process while keeping a business to conduct its most basic operations. In many connection costs reasonable, governments around the economies the connection process is complicated by the world have worked to consolidate requirements for multiple laws and regulations involved—covering service obtaining an electricity connection. What reforms in quality, general safety, technical standards, procurement getting electricity has Doing Business recorded in Small practices and internal wiring installations. In an effort to Island States (table 4.1)? Table 4.1 How have economies in Small Island States made getting electricity easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform The utility in Malta reduced the time required for getting an DB2016 Malta electricity connection by improving its supervision of trenching works. Trinidad and Tobago made getting electricity more costly by DB2016 Trinidad and Tobago introducing a capital contribution toward connection costs. Jamaica made getting electricity less expensive by reducing DB2015 Jamaica the cost of external connection works. The Solomon Islands made getting electricity easier by DB2015 Solomon Islands improving procurement practices for the materials needed to establish new connections. Tonga made getting electricity faster by implementing a time DB2012 Tonga limit for the safety inspection. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 40 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city 2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. In (calendar days) addition, this year Doing Business adds a new Does not include time spent gathering measure to the set of registering property information indicators, an index of the quality of the land administration system in each economy. The Each procedure starts on a separate day. ranking of economies on the ease of registering Procedures that can be fully completed online are recorded as ½ day. property is determined by sorting their distance to frontier scores for registering property. These scores Procedure considered completed once final are the simple average of the distance to frontier document is received scores for each of the component indicators. To No prior contact with officials make the data comparable across economies, several assumptions about the parties to the Cost required to complete each procedure transaction, the property and the procedures are (% of property value) used. Official costs only, no bribes The parties (buyer and seller): No value added or capital gains taxes included  Are limited liability companies, 100% Quality of land administration index (0-30) domestically and privately owned and  Is located in a periurban commercial zone, and perform general commercial activities and no rezoning is required. are located in the economy’s largest business city .  Has no mortgages attached, has been under 2 the same ownership for the past 10 years.  Have 50 employees each, all of whom are nationals.  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value and entire condition and complies with all safety property will be transferred. standards, building codes and legal  Is registered in the land registry or cada- requirements. There is no heating system. stre, or both, and is free of title disputes. For the 11 economies with a population of more than 100 million, data for a second city have been added. 2 Doing Business 2016 SMALL ISLAND STATES 41 REGISTERING PROPERTY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in Small suggest an answer (figure 5.1). The average ranking of Island States to transfer property? The global rankings of the region and comparator regions provide a useful these economies on the ease of registering property benchmark. Figure 5.1 How economies in Small Island States rank on the ease of registering property Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 42 REGISTERING PROPERTY The indicators underlying the rankings may be more time and the cost (figure 5.2). Comparing these revealing. Data collected by Doing Business show what indicators across the region and with averages both for it takes to complete a property transfer in each the region and for comparator regions can provide economy in the region: the number of procedures, the useful insights. Figure 5.2 What it takes to register property in economies in Small Island States Procedures (number) Doing Business 2016 SMALL ISLAND STATES 43 REGISTERING PROPERTY Time (days) Doing Business 2016 SMALL ISLAND STATES 44 REGISTERING PROPERTY Cost (% of property value) * Indicates a “no practice” mark. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 45 REGISTERING PROPERTY Quality of Land Administration Index (0-30) * Indicates a “no practice” mark. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Note: The index ranges from 0 to 30, with higher values indicating better quality of the land administration system. Doing Business 2016 SMALL ISLAND STATES 46 REGISTERING PROPERTY What are the changes over time? Economies worldwide have been making it easier for buyers to use or mortgage their property earlier. What entrepreneurs to register and transfer property—such as property registration reforms has Doing Business by computerizing land registries, introducing time limits recorded in Small Island States (table 5.1)? for procedures and setting low fixed fees. Many have cut the time required substantially—enabling Table 5.1 How have economies in Small Island States made registering property easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Cabo Verde made transferring property less costly by DB2016 Cabo Verde lowering the property registration tax. Vanuatu improved the quality of land administration by DB2016 Vanuatu appointing a land ombudsman to deal with complaints relating to the land registry. Vanuatu made property transfers faster by digitizing its land DB2015 Vanuatu registry system and hiring and training new staff. The Bahamas made transferring property easier by reducing DB2014 Bahamas, The the stamp duty. Cape Verde made property transfers faster by digitizing its DB2014 Cabo Verde land registry. Jamaica made transferring property more difficult by DB2014 Jamaica increasing the transfer tax and the stamp duty. Singapore made transferring property easier by introducing DB2014 Singapore an online procedure for property transfers. Samoa made transferring property more expensive by DB2014 Samoa increasing the stamp duty. The Comoros made it easier to transfer property by reducing DB2013 Comoros the property transfer tax. DB2013 Fiji Fiji made transferring property more difficult by requiring parties to a property transaction to obtain a capital gains tax Doing Business 2016 SMALL ISLAND STATES 47 DB year Economy Reform clearance certificate from the Fiji Revenue and Customs Authority. Mauritius made property transfers faster by implementing an DB2013 Mauritius electronic information management system at the Registrar- General’s Department. In Trinidad and Tobago property transfers became faster DB2013 Trinidad and Tobago thanks to speedier issuance of clearance certificates by the Water and Sewerage Authority. Vanuatu made registering property easier by computerizing DB2012 Vanuatu the land registry. The Solomon Islands made registering property faster by DB2012 Solomon Islands separating the land registry from the business and movable property registries. DB2012 Tonga Tonga made transferring property more costly. São Tomé and Príncipe made registering property less costly DB2012 São Tomé and Príncipe by lowering property transfer taxes. Cape Verde made registering property faster by DB2012 Cabo Verde implementing time limits for the notaries and the land registry. The Bahamas made transferring property more costly by DB2012 Bahamas, The increasing the applicable stamp duty fees. Cape Verde eased property registration by switching from DB2011 Cabo Verde fees based on a percentage of the property value to lower fixed rates. Jamaica eased the transfer of property by lowering transfer taxes and fees, offering expedited registration procedures DB2011 Jamaica and making information from the company registrar available online. Maldives now allows registered companies to own land as DB2011 Maldives long as all company shares are owned by Maldivians. Doing Business 2016 SMALL ISLAND STATES 48 DB year Economy Reform The appointment of a registrar focusing only on property cut DB2011 Grenada the time needed to transfer property in Grenada by almost half. In Antigua and Barbuda, to transfer property now requires DB2011 Antigua and Barbuda clearance by the chief surveyor to avoid mischievous declarations. Samoa shifted from a deed system to a title system and fully DB2011 Samoa computerized its land registry, which reduced the time required to register property by 4 months. Singapore made registering property easier by upgrading DB2010 Singapore electronic systems and streamlining the administrative procedures of the government agencies involved. Jamaica made registering property easier by reducing the DB2010 Jamaica property transfer tax. Mauritius made registering property easier by setting a DB2010 Mauritius statutory time limit of 15 days for issuance of the final property title by the land registry. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 49 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders’ rights to view a potential borrower’s financial Strength of legal rights index (0–12) history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially movable property, as security to generate capital— Depth of credit information index (0–8) while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable The ranking of economies on the ease of getting collateral (for more details on each case, see the Data credit is determined by sorting their distance to Notes section of the Doing Business 2016 report). frontier scores for getting credit. These scores are These scenarios assume that the borrower: the distance to frontier score for the strength of  Is a private limited liability company. legal rights index and the depth of credit Has its headquarters and only base of information index. operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2016 SMALL ISLAND STATES 50 GETTING CREDIT Where do the region’s economies stand today? How well do the credit information systems and credit suggest an answer (figure 6.1). The average collateral and bankruptcy laws in economies in Small ranking of the region and comparator regions provide a Island States facilitate access to credit? The global useful benchmark. rankings of these economies on the ease of getting Figure 6.1 How economies in Small Island States rank on the ease of getting credit Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 51 GETTING CREDIT Another way to assess how well regulations and the strength of legal rights index for Small Island States institutions support lending and borrowing in the region and comparators on the strength of legal rights index. is to see where the region stands in the distribution of Figure 6.3 shows the same thing for the depth of credit scores across regions. Figure 6.2 highlights the score on information index. Figure 6.2 How strong are legal rights for borrowers and lenders? Region scores on strength of legal rights index Note: Higher scores indicate that collateral and bankruptcy laws are better designed to facilitate access to credit. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 52 Figure 6.3 How much credit information is shared—and how widely? Region scores on depth of credit information index Note: Higher scores indicate the availability of more credit information, from either a credit registry or a credit bureau, to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 53 GETTING CREDIT What are the changes over time? When economies strengthen the legal rights of lenders information, they can increase entrepreneurs’ access to and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded increase the scope, coverage and accessibility of credit in Small Island States (table 6.1)? Table 6.1 How have economies in Small Island States made getting credit easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform The Comoros improved access to credit information by DB2016 Comoros establishing a new credit registry. The Seychelles improved access to credit information by DB2016 Seychelles establishing a credit registry. Cabo Verde improved its credit information system by DB2015 Cabo Verde adopting a new law providing for the establishment of credit bureaus. The Dominican Republic improved its credit information system by enacting a new law regulating the protection of DB2015 Dominican Republic personal data and the operation of credit reporting institutions. Jamaica improved access to credit by establishing credit bureaus and by adopting a new secured transactions law that implements a functional secured transactions system, DB2015 Jamaica broadens the range of assets that can be used as collateral, allows a general description of assets granted as collateral and establishes a modern, notice-based collateral registry. Trinidad and Tobago improved access to credit by adopting the Bankruptcy and Insolvency Act, which establishes clear DB2015 Trinidad and Tobago grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures as well as a time limit for the stay. Jamaica improved its credit information system by creating a DB2014 Jamaica legal and regulatory framework for private credit bureaus. Mauritius improved access to credit information by DB2014 Mauritius expanding the scope of credit information and increasing the coverage of the historical data distributed from 2 years to 3. Doing Business 2016 SMALL ISLAND STATES 54 DB year Economy Reform Palau strengthened its secured transactions system through a new law that establishes a centralized collateral registry, broadens the range of assets that can be used as collateral to include future assets, allows a general description in the DB2014 Palau security agreement of debts and obligations as well as assets pledged as collateral, establishes clear priority rules outside bankruptcy for secured creditors and allows out-of-court enforcement of the collateral. Singapore improved its credit information system by DB2014 Singapore guaranteeing by law borrowers’ right to inspect their own data. Tonga improved access to credit information by establishing DB2014 Tonga a private credit bureau. Vanuatu improved access to credit information by DB2014 Vanuatu establishing a private credit bureau. Mauritius improved access to credit information by starting to DB2013 Mauritius collect payment information from retailers and beginning to distribute both positive and negative information. Seychelles improved access to credit information by adopting DB2013 Seychelles new regulations that provide for the establishment and operation of a credit registry database. Cape Verde improved its credit information system by DB2012 Cabo Verde introducing a new online platform and by starting to provide 5 years of historical data. Access to credit in Comoros was improved through amendments to the OHADA Uniform Act on Secured Transactions that broaden the range of assets that can be DB2012 Comoros used as collateral (including future assets), extend the security interest to the proceeds of the original asset and introduce the possibility of out-of-court enforcement. Tonga strengthened its secured transactions system by passing a new law that allows a general description of the DB2012 Tonga obligation in the security agreement and gives secured creditors priority outside bankruptcy. Timor-Leste improved its credit information system by DB2012 Timor-Leste establishing a public credit registry. Doing Business 2016 SMALL ISLAND STATES 55 DB year Economy Reform The Marshall Islands improved access to credit through a new law on secured transactions that establishes a central collateral registry, broadens the range of assets that can be DB2011 Marshall Islands used as collateral, allows a general description of debts and obligations and assets granted as collateral and establishes clear priority rules outside bankruptcy for secured creditors. Singapore improved its credit information system by DB2011 Singapore collecting and distributing information on firms. The Solomon Islands strengthened access to credit by passing a new secured transactions law that broadens the range of assets that can be used as collateral, allows a general DB2011 Solomon Islands description of debts and obligations secured by collateral, permits out-of-court enforcement and creates a collateral registry. Operation of a new private credit bureau improved the credit DB2011 Papua New Guinea information system in Papua New Guinea. Samoa strengthened its secured transactions system by beginning to enforce its new company act and securities act, which allow a corporation to grant a floating charge DB2010 Samoa (debenture) over all its assets and which automatically extend a security interest to the products and proceeds of collateral for a floating charge. Mauritius improved access to credit information by allowing the licensing of private credit information bureaus and by DB2010 Mauritius expanding the coverage of the Mauritius Credit Information Bureau to all institutions offering credit facilities. Haiti strengthened its secured transactions system through a new law broadening the range of assets that can be used as collateral, allowing future and after-acquired property to be DB2010 Haiti used as collateral and automatically extending security interests to the products, proceeds and replacements of the original asset. Cape Verde improved access to credit information by allowing online access to the central bank’s credit information database for financial institutions providing and retrieving DB2010 Cabo Verde information. At the same time, Cape Verde raised the minimum threshold for personal loans included in the database from 1,000 to 5,000 escudos. Doing Business 2016 SMALL ISLAND STATES 56 DB year Economy Reform Vanuatu strengthened its secured transactions system by DB2010 Vanuatu launching a unified and geographically centralized collateral registry. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 57 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of WHAT THE PROTECTING MINORITY INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. Effective regulations define related-party transactions precisely, promote clear and efficient disclosure requirements, require Extent of disclosure index (0–10) shareholder participation in major decisions of the Review and approval requirements for related-party company and set detailed standards of accountability transactions ; Disclosure requirements for related-party for company insiders. transactions What do the indicators cover? Extent of director liability index (0–10) Doing Business measures the protection of minority Ability of minority shareholders to sue and hold interested investors from conflicts of interest through one set of directors liable for prejudicial related-party transactions; indicators and shareholders’ rights in corporate Available legal remedies (damages, disgorgement of profits, governance through another. The ranking of economies fines, imprisonment, rescission of the transaction) on the strength of minority investor protections is determined by sorting their distance to frontier scores Ease of shareholder suits index (0–10) for protecting minority investors. These scores are the Access to internal corporate documents; Evidence simple average of the distance to frontier scores for the obtainable during trial and allocation of legal expenses extent of conflict of interest regulation index and the Extent of conflict of interest regulation index extent of shareholder governance index. To make the (0–10) data comparable across economies, a case study uses Simple average of the extent of disclosure, extent of director several assumptions about the business and the liability and ease of shareholder indices transaction. Extent of shareholder rights index (0-10) The business (Buyer): Shareholders’ rights and role in major corporate decisions  Is a publicly traded corporation listed on the economy’s most important stock exchange Extent of ownership and control index (0-10) (or at least a large private company with Governance safeguards protecting shareholders from undue multiple shareholders). board control and entrenchment  Has a board of directors and a chief executive Extent of corporate transparency index (0-10) officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Corporate transparency on ownership stakes, compensation, specifically required by law. audits and financial prospects The transaction involves the following details: Extent of shareholder governance index (0–  Mr. James, a director and the majority 10) shareholder of the company, proposes that Simple average of the extent of shareholders rights, extent the company purchase used trucks from of ownership and control and extent of corporate another company he owns. transparency indices  The price is higher than the going price for Strength of investor protection index (0–10) used trucks, but the transaction goes forward. Simple average of the extent of conflict of interest  All required approvals are obtained, and all regulation and extent of shareholder governance indices required disclosures made, though the transaction is prejudicial to Buyer.  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2016 SMALL ISLAND STATES 58 PROTECTING MINORITY INVESTORS Where do the region’s economies stand today? How strong are investor protections against self-dealing protection of minority investors, a higher ranking does in economies in Small Island States? The global rankings indicate that an economy’s regulations offer stronger of these economies on the strength of investor investor protections against self-dealing in the areas protection index suggest an answer (figure 7.1). While measured. the indicator does not measure all aspects related to the Figure 7.1 How economies in Small Island States rank on the strength of investor protection index Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 59 PROTECTING MINORITY INVESTORS The strength of minority investor protection index is the highlight the scores on the various minority investor average of the extent of conflict of interest regulation protection indices for Small Island States. Comparing index and the extent of shareholder governance index. the scores across the region and with averages both for The index ranges from 0 to 10, rounded to the nearest the region and for comparator regions can provide decimal place, with higher values indicating stronger useful insights. minority investor protections. Figures 7.2 and 7.3 Figure 7.2 How extensive are conflict of interest regulations? Extent of conflict of interest regulation index (0-10) Note: Higher values indicate stronger regulation of conflicts of interest. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 60 Figure 7.3 How extensive is shareholder governance? Extent of shareholder governance index (0-10) Note: Higher scores indicate stronger rights of shareholders in corporate governance. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 61 PROTECTING MINORITY INVESTORS What are the changes over time? Economies with the strongest protections of minority reforms to strengthen minority investor protections may investors from self-dealing require detailed disclosure move ahead on different fronts—such as through new or and define clear duties for directors. They also have well- amended company laws, securities regulations or functioning courts and up-to-date procedural rules that revisions to court procedures. What minority investor give minority shareholders the means to prove their case protection reforms has Doing Business recorded in Small and obtain a judgment within a reasonable time. So Island States (table 7.1)? Table 7.1 How have economies in Small Island States strengthened minority investor protections—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform The Comoros strengthened minority investor protections by introducing greater requirements for disclosure of related- party transactions to the board of directors and by making it DB2015 Comoros possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. The Dominican Republic strengthened minority investor DB2015 Dominican Republic protections by introducing greater shareholder rights and requirements for greater corporate transparency. The Solomon Islands strengthened investor protections by DB2012 Solomon Islands increasing shareholder access to corporate information. The Dominican Republic strengthened investor protections through a new company law requiring greater corporate DB2010 Dominican Republic disclosure, director liability and shareholder access to information. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 62 WHAT THE PAYING TAXES INDICATORS PAYING TAXES Taxes are essential. The level of tax rates needs to MEASURE be carefully chosen—and needless complexity in tax rules avoided. Firms in economies that rank Tax payments for a manufacturing company better on the ease of paying taxes in the Doing in 2014 (number per year adjusted for Business study tend to perceive both tax rates and electronic and joint filing and payment) tax administration as less of an obstacle to Total number of taxes and contributions paid, business according to the World Bank Enterprise including consumption taxes (value added tax, Survey research. sales tax or goods and service tax) Method and frequency of filing and payment What do the indicators cover? Time required to comply with 3 major taxes Using a case scenario, Doing Business records the (hours per year) taxes and mandatory contributions that a medium- size company must pay in a given year as well as Collecting information and computing the tax measures of the administrative burden of paying payable taxes and contributions. This case scenario uses a set Completing tax return forms, filing with of financial statements and assumptions about proper agencies transactions made over the year. Information is also Arranging payment or withholding compiled on the frequency of filing and payments as well as time taken to comply with tax laws. The Preparing separate tax accounting books, if ranking of economies on the ease of paying taxes is required determined by sorting their distance to frontier Total tax rate (% of profit before all taxes) scores on the ease of paying taxes. These scores are the simple average of the distance to frontier scores Profit or corporate income tax for each of the component indicators, with a Social contributions and labor taxes paid by threshold and a nonlinear transformation applied to the employer one of the component indicators, the total tax rate . 3 Property and property transfer taxes The financial statement variables have been updated to be proportional to 2012 income per capita; Dividend, capital gains and financial previously they were proportional to 2005 income transactions taxes per capita. To make the data comparable across Waste collection, vehicle, road and other taxes economies, several assumptions are used.  Taxes and mandatory contributions are  TaxpayerCo is a medium-size business that measured at all levels of government. started operations on January 1, 2013.  Taxes and mandatory contributions include  The business starts from the same financial corporate income tax, turnover tax and all position in each economy. All the taxes labor taxes and contributions paid by the and mandatory contributions paid during company. the second year of operation are recorded.  A range of standard deductions and exemptions are also recorded. The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. 3 The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Doing Business 2016 SMALL ISLAND STATES 63 PAYING TAXES Where do the region’s economies stand today? What is the administrative burden of complying with information for assessing the tax compliance burden for taxes in economies in Small Island States—and how businesses (figure 8.1). The average ranking of the region much do firms pay in taxes? The global rankings of these provides a useful benchmark. economies on the ease of paying taxes offer useful Figure 8.1 How economies in Small Island States rank on the ease of paying taxes Note: All economies with a total tax rate below the threshold of 26.1% applied in DB2015, receive the same distance to frontier score for the total tax rate (a distance to frontier score of 100 for the total tax rate) for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 64 PAYING TAXES The indicators underlying the rankings may be more major taxes (corporate income tax, VAT or sales tax and revealing. Data collected by Doing Business show what it labor taxes and mandatory contributions)—as well as the takes to comply with tax regulations in each economy in total tax rate (figure 8.2). Comparing these indicators the region—the number of payments per year and the across the region and with averages both for the region time required to prepare, and file and pay taxes the 3 and for comparator regions can provide useful insights. Figure 8.2 How easy is it to pay taxes in economies in Small Island States—and what are the total tax rates? Payments (number per year) Doing Business 2016 SMALL ISLAND STATES 65 PAYING TAXES Time (hours per year) Doing Business 2016 SMALL ISLAND STATES 66 PAYING TAXES Total tax rate (% of profit) Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 67 PAYING TAXES What are the changes over time? Economies around the world have made paying taxes concrete results. Some economies simplifying faster and easier for businesses—such as by compliance with tax obligations and reducing rates have consolidating filings, reducing the frequency of seen tax revenue rise. What tax reforms has Doing payments or offering electronic filing and payment. Business recorded in Small Island States (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How have economies in Small Island States made paying taxes easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform The Bahamas made paying taxes less costly for companies by DB2016 Bahamas, The reducing the business license tax—though it also raised the wage ceiling used in calculating social security contributions. Barbados made paying taxes more costly for companies by DB2016 Barbados raising the ceiling for social security contributions and introducing a new municipal solid waste tax. Jamaica made paying taxes easier and less costly for companies by encouraging taxpayers to pay their taxes online, introducing an employment tax credit and increasing the depreciation rate for industrial buildings. At the same DB2016 Jamaica time, Jamaica introduced a minimum business tax, raised the contribution rate for the national insurance scheme paid by employers and increased the rates for stamp duty, the property tax, the property transfer tax and the education tax. Maldives made paying taxes easier for companies by introducing more payment counters at the tax authority and DB2016 Maldives express counters at peak periods. At the same time, Maldives introduced additional disclosure requirements for filing corporate income tax returns. Tonga made paying taxes more complicated for companies DB2016 Tonga by reintroducing the annual fee for a business license. Jamaica made paying taxes more costly for companies by DB2015 Jamaica introducing a new minimum business tax. Doing Business 2016 SMALL ISLAND STATES 68 DB year Economy Reform Kiribati made paying taxes more complicated for companies DB2015 Kiribati by introducing VAT. St. Kitts and Nevis made paying taxes less costly for DB2015 St. Kitts and Nevis companies by reducing the corporate income tax rate. The Seychelles made paying taxes easier for companies by reducing the business tax rate applicable to income above 1 million Seychelles rupees ($77,700) and by introducing a DB2015 Seychelles simplified new tax return allowing joint filing and payment of the business tax, VAT and corporate social responsibility tax. On the other hand, it increased employers’ pension fund contribution rate. Fiji made paying taxes more complicated for companies by transferring the fringe benefit tax liability from employees to DB2014 Fiji employers and by limiting the deductibility of mandatory contributions. Jamaica made paying taxes less costly for companies by DB2014 Jamaica reducing the corporate income tax rate—though it also increased vehicle and asset taxes. Maldives made paying taxes easier for companies by DB2014 Maldives introducing electronic filing systems for corporate income tax, sales tax and pension contributions. The Seychelles made paying taxes more complicated for DB2014 Seychelles companies by introducing a value added tax. Tonga made paying taxes more complicated for companies DB2014 Tonga by introducing a superannuation levy—though it also abolished the business license for 2013. Fiji made paying taxes less costly for companies by reducing DB2013 Fiji the profit tax rate. At the same time, Fiji introduced capital gains tax. Jamaica made paying taxes easier for companies by allowing DB2013 Jamaica joint filing and payment of all social security contributions. Maldives introduced a goods and service tax, a business DB2013 Maldives profit tax and additional social contributions. Doing Business 2016 SMALL ISLAND STATES 69 DB year Economy Reform The Dominican Republic increased the corporate income tax DB2013 Dominican Republic rate. The Seychelles made paying taxes less costly for firms by DB2012 Seychelles eliminating the social security tax. St. Kitts and Nevis made paying taxes easier by introducing a DB2012 St. Kitts and Nevis value added tax. DB2011 Mauritius Mauritius introduced a new corporate social responsibility tax. São Tomé and Principe reduced the corporate income tax DB2011 São Tomé and Príncipe rate to a standard 25%. The Seychelles removed the tax-free threshold limit and DB2011 Seychelles lowered corporate income tax rates. Tonga simplified the payment of taxes by replacing a 2-tier system with a 25% corporate income tax rate for both DB2011 Tonga domestic and foreign companies and introducing tax incentives with a broad-based capital allowance system to replace tax holidays and other tax concessions. DB2011 Cabo Verde Cape Verde abolished the stamp duties on sales and checks. Timor-Leste made paying taxes less costly for companies by DB2010 Timor-Leste reducing the corporate income tax rate and eliminating the alternative minimum tax and the withholding tax on interest. Fiji made paying taxes less costly for companies by reducing DB2010 Fiji the corporate income tax rate—though it also imposed a road user levy on all vehicles. St. Lucia made tax compliance more time consuming for DB2010 St. Lucia companies by fully implementing new consumption tax legislation. St. Vincent and the Grenadines made paying taxes less costly for companies by reducing the corporate income tax rate— DB2010 St. Vincent and the Grenadines though it also increased employers’ social security contribution rate. DB2010 Tonga Tonga made paying taxes easier and less costly for companies through a new income tax law introducing self- Doing Business 2016 SMALL ISLAND STATES 70 DB year Economy Reform assessment as well as accelerated depreciation and amortization for certain assets. Cape Verde made paying taxes less costly for companies by DB2010 Cabo Verde reducing the corporate income tax rate. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 71 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE FOR IMPORT & EXPORT business. Excessive document requirements, burdensome customs procedures, inefficient port Documentary compliance – cost (US$) & time operations and inadequate infrastructure all lead to (hours) extra costs and delays for exporters and importers, stifling trade potential. Obtain, prepare and submit documents: What do the indicators cover? -During transport, clearance, inspections and port or border handling in origin economy Doing Business records the time and cost associated with the logistical process of exporting and -Required by origin, transit and destination economies importing goods. Under the new methodology introduced this year, Doing Business measures the Covers all documents by law and in practice time and cost (excluding tariffs) associated with three Border compliance – cost (US$) & time sets of procedures—documentary compliance, (hours) border compliance and domestic transport—within the overall process of exporting or importing a Customs clearance and inspections shipment of goods. The ranking of economies on the Inspections by other agencies ease of trading across borders is determined by Port or border handling sorting their distance to frontier scores for trading across borders. These scores are the simple average Obtaining, preparing and submitting of the distance to frontier scores for the time and documents during clearance, inspections and port or border handling cost for documentary compliance and border compliance to export and import. Domestic transport* Loading and unloading of shipment To make the data comparable across economies, a few assumptions are made about the traded goods Transport between warehouse and terminal/port and the transactions: Transport between terminal/port and border Time Obtaining, preparing and submitting  Time is measured in hours, and 1 day is 24 documents during domestic transport hours (for example, 22 days are recorded Traffic delays and road police checks while as 22 × 24 = 528 hours). If customs shipment is en route clearance takes 7.5 hours, the data are recorded as is. Alternatively, suppose that * Although Doing Business collects and publishes data on documents are submitted to a customs the time and cost for domestic transport, it does not use agency at 8:00 a.m., are processed these data in calculating the distance to frontier score for overnight and can be picked up at 8:00 trading across borders or the ranking on the ease of trading a.m. the next day. In this case the time for across borders. customs clearance would be recorded as Cost 24 hours because the actual procedure  Insurance cost and informal payments for took 24 hours. which no receipt is issued are excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Doing Business 2016 SMALL ISLAND STATES 72 Assumptions of the case study  For each of the 189 economies covered by  Shipping cost based on weight is assumed to Doing Business, it is assumed that a shipment be greater than shipping cost based on travels from a warehouse in the largest business volume. city of the exporting economy to a warehouse  If government fees are determined by the in the largest business city of the importing value of the shipment, the value is assumed economy. For 11 economies the data are also to be $50,000. collected, under the same case study assumptions, for the second largest business  The product is new, not secondhand or used city. merchandise.  The import and export case studies assume  The exporting firm is responsible for hiring different traded products. It is assumed that and paying for a freight forwarder or customs each economy imports a standardized shipment broker (or both) and pays for all costs related of 15 metric tons of containerized auto parts to international shipping, domestic transport, (HS 8708) from its natural import partner—the clearance and mandatory inspections by economy from which it imports the largest value customs and other government agencies, port (price times quantity) of auto parts. It is or border handling, documentary compliance assumed that each economy exports the fees and the like for exports. The importing product of its comparative advantage (defined firm is responsible for the above costs for by the largest export value) to its natural export imports. partner—the economy that is the largest  The mode of transport is the one most widely purchaser of this product. Precious metal and used for the chosen export or import product gems, live animals and pharmaceuticals are and the trading partner, as is the seaport, excluded from the list of possible export airport or land border crossing. products, however, and the second largest product category is considered as needed.  All electronic submissions of information requested by any government agency in  To identify the trading partners and export connection with the shipment are considered product for each economy, Doing Business to be documents obtained, prepared and collected data on trade flows for the most submitted during the export or import recent four-year period from international process. databases such as the United Nations Commodity Trade Statistics Database (UN  A port or border is defined as a place Comtrade). For economies for which trade flow (seaport, airport or land border crossing) data were not available, data from ancillary where merchandise can enter or leave an government sources (various ministries and economy. departments) and World Bank Group country  Government agencies considered relevant offices were used to identify the export product are agencies such as customs, port and natural trading partners. authorities, road police, border guards,  A shipment is a unit of trade. Export shipments standardization agencies, ministries or do not necessarily need to be containerized, departments of agriculture or industry, while import shipments of auto parts are national security agencies and any other assumed to be containerized. government authorities. Doing Business 2016 SMALL ISLAND STATES 73 TRADING ACROSS BORDERS Where do the region’s economies stand today? How easy it is for businesses in economies in Small across borders suggest an answer (figure 9.1). The Island States to export and import goods? The global average ranking of the region and comparator regions rankings of these economies on the ease of trading provide a useful benchmark. Figure 9.1 How economies in Small Island States rank on the ease of trading across borders Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 74 TRADING ACROSS BORDERS The indicators reported here are for trading a shipment and import is collected from local freight forwarders, of goods by the most widely used mode of transport customs brokers and traders. Comparing these indicators (whether sea, land, air or some combination of these). across the region and with averages both for the region The information on the time and cost to complete export and for comparator regions can provide useful insights. Figure 9.2 What it takes to trade across borders in economies in Small Island States Time to export: Border compliance (hours) Doing Business 2016 SMALL ISLAND STATES 75 TRADING ACROSS BORDERS Cost to export: Border compliance (USD) Doing Business 2016 SMALL ISLAND STATES 76 TRADING ACROSS BORDERS Time to export: Documentary compliance (hours) Doing Business 2016 SMALL ISLAND STATES 77 TRADING ACROSS BORDERS Cost to export: Documentary compliance (USD) Doing Business 2016 SMALL ISLAND STATES 78 TRADING ACROSS BORDERS Time to import: Border compliance (hours) Doing Business 2016 SMALL ISLAND STATES 79 TRADING ACROSS BORDERS Cost to import: Border compliance (USD) Doing Business 2016 SMALL ISLAND STATES 80 TRADING ACROSS BORDERS Time to import: Documentary compliance (hours) Doing Business 2016 SMALL ISLAND STATES 81 TRADING ACROSS BORDERS Cost to import: Documentary compliance (USD) Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 82 TRADING ACROSS BORDERS What are the changes over time? In economies around the world, trading across borders systems. These changes help improve their trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing Business tools to facilitate trade—including single windows, risk- recorded in Small Island States (table 9.1)? based inspections and electronic data interchange Table 9.1 How have economies in Small Island States made trading across borders easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform The Bahamas made trading across borders easier by fully implementing an electronic data interchange system, which DB2016 Bahamas, The reduced the time for preparation and submission of trade documents for both exporting and importing. Vanuatu reduced the border compliance time for importing DB2016 Vanuatu by improving infrastructure at the port of Vila. The Dominican Republic made trading across borders easier DB2015 Dominican Republic by reducing the number of documents required for exports and imports. St. Lucia made trading across borders easier by implementing the ASYCUDA World electronic system for the submission of DB2015 St. Lucia export and import documents and by reducing the number of export documents required. Palau made trading across borders easier by improving the DB2015 Palau system for calculating customs duties and thereby reducing customs clearance time. St. Lucia made trading across borders more difficult by DB2014 St. Lucia introducing a new export document. Antigua and Barbuda made trading across borders more DB2013 Antigua and Barbuda difficult by increasing the number of documents required to import. Dominica reduced the time to import by implementing the DB2013 Dominica ASYCUDA World electronic data interchange system. Doing Business 2016 SMALL ISLAND STATES 83 DB year Economy Reform Grenada reduced the time to export and import by DB2013 Grenada implementing the ASYCUDA World electronic data interchange system. Jamaica reduced the time to import by allowing customs DB2013 Jamaica entries to be lodged at night. St. Kitts and Nevis made it more expensive to export by DB2013 St. Kitts and Nevis increasing the cost of operations at the port of Basseterre. Trinidad and Tobago reduced the time to export and import by launching the ASYCUDA World electronic data interchange DB2013 Trinidad and Tobago system and simplifying the process for obtaining a certificate of origin. Vanuatu made trading across borders faster by upgrading DB2012 Vanuatu Port-Vila’s wharf infrastructure, which increased the efficiency of port and terminal handling activities. São Tomé and Príncipe made trading across borders faster by DB2012 São Tomé and Príncipe adopting legislative, administrative and technological improvements. The Seychelles made trading across borders faster by DB2012 Seychelles introducing electronic submission of customs documents. Fiji made trading easier by opening customer care service DB2011 Fiji centers and improving customs operations. Grenada’s customs administration made trading faster by DB2011 Grenada simplifying procedures, reducing inspections, improving staff training and enhancing communication with users. Grenada reduced the time for trading across borders through DB2010 Grenada ongoing training of customs officers and brokers and implementation of electronic reference sources. St. Kitts and Nevis reduced the time required for trading DB2010 St. Kitts and Nevis across borders by making it possible to submit customs declarations electonically. DB2010 Mauritius Mauritius reduced the time for trading across borders by Doing Business 2016 SMALL ISLAND STATES 84 DB year Economy Reform introducing electronic submission for customs declarations and bills of lading with no requirement for physical copies. Haiti speeded up the clearance of goods through customs by DB2010 Haiti implementing the ASYCUDA system and introducing 24-hour operations at the port. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 85 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Time required to enforce a contract through courts encourage new business relationships because the courts (calendar days) businesses know they can rely on the courts if a new customer fails to pay. Speedy trials are essential for Time to file and serve the case small enterprises, which may lack the resources to Time for trial and to obtain the judgment stay in business while awaiting the outcome of a long court dispute. Time to enforce the judgment What do the indicators cover? Cost required to enforce a contract through the courts (% of claim) Doing Business measures the time and cost for resolving a standardized commercial dispute through Attorney fees a local first-instance court. In addition, this year it Court fees introduces a new measure, the quality of judicial Enforcement fees processes index, evaluating whether each economy has adopted a series of good practices that promote Quality of judicial processes index (0-18) quality and efficiency in the court system. This new Court structure and proceedings (0-5) index replaces the indicator on procedures, which was eliminated this year. The ranking of economies Case management (0-6) on the ease of enforcing contracts is determined by Court automation (0-4) sorting their distance to frontier scores. These scores Alternative dispute resolution (0-3) are the simple average of the distance to frontier scores for each of the component indicators The dispute in the case study involves the breach of a  The value of the dispute is 200% of the sales contract between 2 domestic businesses. The income per capita or the equivalent in local case study assumes that the court hears an expert on currency of USD 5,000, whichever is greater. the quality of the goods in dispute. This distinguishes  The seller sues the buyer before the court the case from simple debt enforcement. To make the with jurisdiction over commercial cases worth data comparable across economies, Doing Business 200% of income per capita or $5,000. uses several assumptions about the case:  The seller requests a pretrial attachment to  The dispute concerns a lawful transaction secure the claim. between two businesses (Seller and Buyer), both located in the economy’s largest  The dispute on the quality of the goods business city. For 11 economies the data requires an expert opinion. are also collected for the second largest  The judge decides in favor of the seller; there business city. is no appeal.  The buyer orders custom-made goods,  The seller enforces the judgment through a then fails to pay. public sale of the buyer’s movable assets. Doing Business 2016 SMALL ISLAND STATES 86 ENFORCING CONTRACTS Where do the region’s economies stand today? How efficient is the process of resolving a commercial ease of enforcing contracts suggest an answer (figure dispute through the courts in economies in Small Island 10.1). The average ranking of the region and comparator States? The global rankings of these economies on the regions provide a useful benchmark. Figure 10.1 How economies in Small Island States rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 87 ENFORCING CONTRACTS The indicators underlying the rankings may also be judicial processes index (figure 10.2). Comparing these revealing. Data collected by Doing Business show what it indicators across the region and with averages both for takes to enforce a contract through the courts in each the region and for comparator regions can provide economy in the region: the time, the cost and quality of useful insights. Figure 10.2 What it takes to enforce a contract through the courts in economies in Small Island States Time (days) Doing Business 2016 SMALL ISLAND STATES 88 ENFORCING CONTRACTS Cost (% of claim) Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 89 ENFORCING CONTRACTS Quality of Judicial Processes Index (0-18) Source: Doing Business database. Note: Higher values indicate more efficient judicial processes. Doing Business 2016 SMALL ISLAND STATES 90 ENFORCING CONTRACTS What are the changes over time? Economies in all regions have improved contract reducing backlogs by introducing periodic reviews to enforcement in recent years. A judiciary can be improved clear inactive cases from the docket and by making in different ways. Higher-income economies tend to look procedures faster. What reforms making it easier (or for ways to enhance efficiency by introducing new more difficult) to enforce contracts has Doing Business technology. Lower-income economies often work on recorded in Small Island States (table 10.1)? Table 10.1 How have economies in Small Island States made enforcing contracts easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform The Bahamas made enforcing contracts easier by introducing new rules of civil procedure focused on streamlining and DB2015 Bahamas, The simplifying court proceedings and ensuring less costly resolution of disputes. Mauritius made enforcing contracts easier by introducing an DB2015 Mauritius electronic filing system for court users. Singapore made enforcing contracts easier by introducing a DB2015 Singapore new electronic litigation system that streamlines litigation proceedings. Seychelles made enforcing contracts easier by establishing a commercial court, implementing and refining its case DB2015 Seychelles management system, introducing court-annexed mediation, and addressing scheduling conflicts within the courts. Mauritius made enforcing contracts easier by liberalizing the profession of court ushers, including by allowing registered DB2014 Mauritius ushers to serve as bailiffs in carrying out enforcement proceedings. Palau made enforcing contracts easier by introducing an DB2014 Palau electronic filing system for court users. The Seychelles expanded the jurisdiction of the lower court, DB2012 Seychelles increasing the time required to enforce contracts. Timor-Leste increased court efficiency by training and DB2011 Timor-Leste appointing new judges and passing a new civil procedure code. Mauritius speeded up the resolution of commercial disputes DB2011 Mauritius by recruiting more judges and adding more courtrooms. Doing Business 2016 SMALL ISLAND STATES 91 DB year Economy Reform Papua New Guinea made enforcing contracts easier by fully DB2010 Papua New Guinea launching the specialized commercial track at the national court. Grenada assigned an additional judge to the high court, DB2010 Grenada reducing the court’s backlog and making it easier to enforce contracts. Mauritius made enforcing contracts easier by setting up a DB2010 Mauritius specialized commercial division in its supreme court. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 92 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses to normal operation and increase returns to Time required to recover debt (years) creditors. By clarifying the expectations of creditors Measured in calendar years and debtors about the outcome of insolvency Appeals and requests for extension are proceedings, well-functioning insolvency systems can included facilitate access to finance, save more viable businesses and sustainably grow the economy. Cost required to recover debt (% of debtor’s estate) What do the indicators cover? Doing Business studies the time, cost and outcome of Measured as percentage of estate value insolvency proceedings involving domestic legal Court fees entities. These variables are used to calculate the Fees of insolvency administrators recovery rate, which is recorded as cents on the dollar recovered by secured creditors through Lawyers’ fees reorganization, liquidation or debt enforcement Assessors’ and auctioneers’ fees (foreclosure or receivership) proceedings. To Other related fees determine the present value of the amount recovered by creditors, Doing Business uses the Outcome lending rates from the International Monetary Fund, Whether business continues operating as a supplemented with data from central banks and the going concern or business assets are sold Economist Intelligence Unit. piecemeal In addition, Doing Business evaluates the adequacy Recovery rate for creditors and integrity of the existing legal framework applicable to liquidation and reorganization Measures the cents on the dollar recovered by proceedings through the strength of insolvency secured creditors framework index. The index tests whether economies Outcome for the business (survival or not) adopted internationally accepted good practices in determines the maximum value that can be four areas: commencement of proceedings, recovered management of debtor’s assets, reorganization Official costs of the insolvency proceedings are proceedings and creditor participation. deducted The ranking of economies on the ease of resolving Depreciation of furniture is taken into account insolvency is determined by sorting their distance to frontier scores for resolving insolvency. These scores Present value of debt recovered are the simple average of the distance to frontier Strength of insolvency framework index (0- scores for the recovery rate and the strength of 16) insolvency framework index. The Resolving Sum of the scores of four component indices: Insolvency indicator does not measure insolvency proceedings of individuals and financial institutions. Commencement of proceedings index (0-3) The data are derived from questionnaire responses Management of debtor’s assets index (0-6) by local insolvency practitioners and verified through a study of laws and regulations as well as public Reorganization proceedings index (0-3) information on bankruptcy systems. Creditor participation index (0-4) Doing Business 2016 SMALL ISLAND STATES 93 RESOLVING INSOLVENCY Where do the region’s economies stand today? How efficient are insolvency proceedings in economies in region and comparator regions provide a useful Small Island States? The global rankings of these benchmark for assessing the efficiency of insolvency economies on the ease of resolving insolvency suggest proceedings. Speed, low costs and continuation of viable an answer (figure 11.1). The average ranking of the businesses characterize the top-performing economies. Figure 11.1 How economies in Small Island States rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 94 RESOLVING INSOLVENCY The indicators underlying the rankings may be more these indicators across the region and with averages revealing. Data collected by Doing Business show the both for the region and for comparator regions can average recovery rate and the average strength of provide useful insights. insolvency framework index (figure 11.2). Comparing Figure 11.2 How efficient is the insolvency process in economies in Small Island States Recovery Rate (0–100) Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 95 Total Strength of Insolvency Framework index (0-16) Source: Doing Business database. * Indicates a “no practice” mark. See the data notes for details. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “ no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Note: Higher values indicate insolvency legislation that is better designed for rehabilitating viable firms and liquidating nonviable ones. Doing Business 2016 SMALL ISLAND STATES 96 RESOLVING INSOLVENCY What are the changes over time? A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Small Island States (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How have economies in Small Island States made resolving insolvency easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Jamaica made resolving insolvency easier by introducing a reorganization procedure; introducing provisions to facilitate the continuation of the debtor’s business during insolvency DB2016 Jamaica proceedings and allow creditors greater participation in important decisions during the proceedings; and establishing a public office responsible for the general administration of insolvency proceedings. St. Vincent and the Grenadines made resolving insolvency easier by introducing a rehabilitation procedure; introducing provisions to facilitate the continuation of the debtor’s DB2016 St. Vincent and the Grenadines business during insolvency proceedings and allow creditors greater participation in important decisions during the proceedings; and establishing a public office responsible for the general administration of insolvency cases. St. Kitts and Nevis made resolving insolvency easier by introducing a rehabilitation procedure; introducing provisions to facilitate the continuation of the debtor’s business during DB2015 St. Kitts and Nevis insolvency proceedings and allow creditors greater participation in important decisions during the proceedings; and establishing a public office responsible for the general administration of insolvency cases. The Seychelles made resolving insolvency easier by introducing a reorganization procedure, provisions on the DB2015 Seychelles avoidance of undervalued transactions and the possibility to request post-commencement financing during the reorganization. Trinidad and Tobago made resolving insolvency easier by introducing a formal mechanism for rehabilitation, DB2015 Trinidad and Tobago establishing a public office responsible for the general administration of insolvency proceedings and clarifying the rules on appointment of trustees. Doing Business 2016 SMALL ISLAND STATES 97 DB year Economy Reform The Bahamas enhanced its insolvency process by implementing rules for the remuneration of liquidators, DB2014 Bahamas, The allowing voluntary liquidations and outlining clawback provisions for suspect transactions. Mauritius made resolving insolvency easier by introducing guidelines for out-of-court restructuring and standardizing DB2014 Mauritius the process of registration, suspension and removal of insolvency practitioners. Cape Verde introduced qualification requirements for DB2012 Cabo Verde insolvency administrators and a shorter time frame for liquidation proceedings. The Solomon Islands adopted a new law that simplified DB2012 Solomon Islands insolvency proceedings. Mauritius enhanced its insolvency system through a new law introducing a rehabilitation procedure for companies as an DB2010 Mauritius alternative to winding up, defining the rights and obligations of creditors and debtors and setting out sanctions for those who abuse the system. Samoa made resolving insolvency easier through a new DB2010 Samoa company act and a law introducing receivership. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 SMALL ISLAND STATES 98 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING Doing Business presents results for two aggregate even though it is no longer at the frontier in a measures: the distance to frontier score and the ease of subsequent year. doing business ranking, which is based on the distance For scores such as those on the strength of legal rights to frontier score. The ease of doing business ranking index or the quality of land administration index, the compares economies with one another; the distance to frontier is set at the highest possible value. For the total frontier score benchmarks economies with respect to tax rate, consistent with the use of a threshold in regulatory best practice, showing the absolute distance calculating the rankings on this indicator, the frontier is to the best performance on each Doing Business defined as the total tax rate at the 15th percentile of the indicator. When compared across years, the distance to overall distribution for all years included in the analysis frontier score shows how much the regulatory up to and including Doing Business 2015. For the time to environment for local entrepreneurs in an economy has pay taxes the frontier is defined as the lowest time changed over time in absolute terms, while the ease of recorded among all economies that levy the three major doing business ranking can show only how much the taxes: profit tax, labor taxes and mandatory regulatory environment has changed relative to that in contributions, and value added tax (VAT) or sales tax. For other economies. the different times to trade across borders, the frontier is Distance to Frontier defined as 1 hour even though in many economies the time is less than that. The distance to frontier score captures the gap between an economy’s performance and a measure of best In the same formulation, to mitigate the effects of practice across the entire sample of 36 indicators for 10 extreme outliers in the distributions of the rescaled data Doing Business topics (the labor market regulation for most component indicators (very few economies indicators are excluded). For starting a business, for need 700 days to complete the procedures to start a example, the former Yugoslav Republic of Macedonia business, but many need 9 days), the worst performance and New Zealand have the smallest number of is calculated after the removal of outliers. The definition procedures required (1), and New Zealand the shortest of outliers is based on the distribution for each time to fulfill them (0.5 days). Slovenia has the lowest component indicator. To simplify the process two rules cost (0.0), and Australia, Colombia and 103 other were defined: the 95th percentile is used for the economies have no paid-in minimum capital indicators with the most dispersed distributions requirement (table 14.1 in the Doing Business 2016 (including minimum capital, number of payments to pay report). taxes, and the time and cost indicators), and the 99th percentile is used for number of procedures. No outlier is Calculation of the distance to frontier score removed for component indicators bound by definition Calculating the distance to frontier score for each or construction, including legal index scores (such as the economy involves two main steps. In the first step depth of credit information index, extent of conflict of individual component indicators are normalized to a interest regulation index and strength of insolvency common unit where each of the 36 component framework index) and the recovery rate (figure 14.1). indicators y (except for the total tax rate) is rescaled In the second step for calculating the distance to frontier using the linear transformation (worst − y)/(worst − score, the scores obtained for individual indicators for frontier). In this formulation the frontier represents the each economy are aggregated through simple averaging best performance on the indicator across all economies into one distance to frontier score, first for each topic since 2005 or the third year in which data for the and then across all 10 topics: starting a business, dealing indicator were collected. Both the best performance and with construction permits, getting electricity, registering the worst performance are established every five years property, getting credit, protecting minority investors, based on the Doing Business data for the year in which paying taxes, trading across borders, enforcing contracts they are established, and remain at that level for the five and resolving insolvency. More complex aggregation years regardless of any changes in data in interim years. methods—such as principal components and Thus an economy may set the frontier for an indicator unobserved components—yield a ranking nearly Doing Business 2016 SMALL ISLAND STATES 99 identical to the simple average used by Doing Business . than it would have had before (line D is bigger than line 4 Thus Doing Business uses the simplest method: C in figure 14.2 of the Doing Business 2016 report). weighting all topics equally and, within each topic, giving The nonlinear transformation is not based on any equal weight to each of the topic components . 5 economic theory of an “optimal tax rate” that minimizes An economy’s distance to frontier score is indicated on a distortions or maximizes efficiency in an economy’s scale from 0 to 100, where 0 represents the worst overall tax system. Instead, it is mainly empirical in performance and 100 the frontier. All distance to frontier nature. The nonlinear transformation along with the calculations are based on a maximum of five decimals. threshold reduces the bias in the indicator toward However, indicator ranking calculations and the ease of economies that do not need to levy significant taxes on doing business ranking calculations are based on two companies like the Doing Business standardized case decimals. study company because they raise public revenue in other ways—for example, through taxes on foreign The difference between an economy’s distance to companies, through taxes on sectors other than frontier score in any previous year and its score in 2015 manufacturing or from natural resources (all of which are illustrates the extent to which the economy has closed outside the scope of the methodology). In addition, it the gap to the regulatory frontier over time. And in any acknowledges the need of economies to collect taxes given year the score measures how far an economy is from firms. from the best performance at that time. Calculation of scores for economies with 2 cities Treatment of the total tax rate covered The total tax rate component of the paying taxes For each of the 11 economies in which Doing Business indicator set enters the distance to frontier calculation in collects data for the second largest business city as well a different way than any other indicator. The distance to as the largest one, the distance to frontier score is frontier score obtained for the total tax rate is calculated as the population-weighted average of the transformed in a nonlinear fashion before it enters the distance to frontier scores for these two cities (table distance to frontier score for paying taxes. As a result of 13.1). This is done for the aggregate score, the scores for the nonlinear transformation, an increase in the total tax each topic and the scores for all the component rate has a smaller impact on the distance to frontier indicators for each topic. score for the total tax rate—and therefore on the distance to frontier score for paying taxes—for economies with a below-average total tax rate than it would have had before this approach was adopted in Doing Business 2015 (line B is smaller than line A in figure 14.2 of the Doing Business 2016 report). And for economies with an extreme total tax rate (a rate that is very high relative to the average), an increase has a greater impact on both these distance to frontier scores 4 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 5 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. Indicators for all other topics are assigned equal weights Doing Business 2016 SMALL ISLAND STATES 100 Table 13.1 Weights used in calculating the distance to implemented regulatory reforms making it easier to do frontier scores for economies with 2 cities covered business in 3 or more of the 10 topics included in this year’s aggregate distance to frontier score. Changes Economy City Weight (%) making it more difficult to do business are subtracted Dhaka 78 Bangladesh from the total number of those making it easier to do Chittagong 22 São Paulo 61 business. Twenty-four economies meet this criterion: Brazil Armenia; Azerbaijan; Benin; Costa Rica; Côte d’Ivoire; Rio de Janeiro 39 Shanghai 55 Cyprus; Hong Kong SAR, China; Indonesia; Jamaica; China Beijing 45 Kazakhstan; Kenya; Lithuania; Madagascar; Mauritania; Mumbai 47 Morocco; Romania; the Russian Federation; Rwanda; India Delhi 53 Senegal; Togo; Uganda; the United Arab Emirates; Jakarta 78 Uzbekistan; and Vietnam. Second, Doing Business sorts Indonesia Surabaya 22 these economies on the increase in their distance to Tokyo 65 Japan frontier score from the previous year using comparable Osaka 35 data. Mexico City 83 Mexico Monterrey 17 Selecting the economies that implemented regulatory Lagos 77 reforms in at least three topics and had the biggest Nigeria Kano 23 improvements in their distance to frontier scores is Karachi 65 intended to highlight economies with ongoing, broad- Pakistan Lahore 35 based reform programs. The improvement in the Moscow 70 Russian Federation distance to frontier score is used to identify the top St. Petersburg 30 New York 60 improvers because this allows a focus on the absolute United States improvement—in contrast with the relative improvement Los Angeles 40 Source: United Nations, Department of Economic and Social shown by a change in rankings—that economies have Affairs, Population Division, World Urbanization Prospects, made in their regulatory environment for business. 2014 Revision. http://esa.un.org/unpd/wup/CD- ROM/Default.aspx. Ease of Doing Business ranking Economies that improved the most across 3 or more The ease of doing business ranking ranges from 1 to 189. Doing Business topics in 2014/15 The ranking of economies is determined by sorting the Doing Business 2016 uses a simple method to calculate aggregate distance to frontier scores, rounded to 2 decimals. which economies improved the ease of doing business the most. First, it selects the economies that in 2014/15 Doing Business 2016 SMALL ISLAND STATES 101 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 189 Contributors http://www.doingbusiness.org/rankings More than 11,400 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 136 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, case studies and repreneurship customized economy and regional profiles http://www.doingbusiness.org/reports Distance to frontier Data benchmarking 189 economies to the frontier Methodology in regulatory practice and a distance to frontier The methodologies and research papers underlying calculator Doing Business http://www.doingbusiness.org/data/distance-to- http://www.doingbusiness.org/methodology frontier Research Information on good practices Abstracts of papers on Doing Business topics and Showing where the many good practices identified related policy issues by Doing Business have been adopted http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice Doing Business reforms Short summaries of DB2016 business regulation reforms and lists of reforms since DB2008 http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2016 SMALL ISLAND STATES 102