59114 Palau © 2010 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 All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone 978-750-8400; fax 978-750-4470; Internet www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher,The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax 202-522-2422; e-mail pubrights@worldbank.org. Additional copies of Doing Business 2011: Making a Difference for Entrepreneurs, Doing Business 2010: Reforming through Difficult Times, Doing Business 2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth and Doing Business in 2004:Understanding Regulations may be purchased at www.doingbusiness.org. ISBN: 978-0-8213-7960-8 E-ISBN: 978-0-8213-8630-9 DOI: 10.1596/978-0-8213-7960-8 ISSN: 1729-2638 Library of Congress Cataloging-in-Publication data has been applied for. Printed in the United States Current features News on the Doing Business project http://www.doingbusiness.org Rankings How economies rank-from 1 to 183 http://www.doingbusiness.org/rankings/ Contents Reformers Short summaries of DB2011 reforms, lists of reformers since DB2004 Introduction and a ranking simulation tool and Aggregate Rankings http://www.doingbusiness.org/reforms/ 5 - Year Measure of Historical data Cumulative Change Customized data sets since DB2004 http://www.doingbusiness.org/custom-query/ Starting a Business Methodology and research Dealing with The methodologies and research papers underlying Doing Business Construction Permits http://www.doingbusiness.org/Methodology/ Registering Property Download reports Access to Doing Business reports as well as subnational and regional Getting Credit reports, reform case studies and customized country and regional profiles Protecting Investors http://www.doingbusiness.org/reports/ Paying Taxes Subnational and regional projects Differences in business regulations at the subnational and regional Trading Across Borders level http://www.doingbusiness.org/subnational-reports/ Enforcing Contracts Law Library Closing a Business Online collection of business laws and regulations relating to business and gender issues Doing Business 2011 http://www.doingbusiness.org/law-library/ Business Reforms http://wbl.worldbank.org/ Local partners More than 8,200 specialists in 183 economies who participate in Doing Business http://www.doingbusiness.org/Local-Partners/Doing-Business/ Business Planet Interactive map on the ease of doing business http://rru.worldbank.org/businessplanet Doing Business 2011 : Making a Difference for Entrepreneurs is the eighth in a series of annual reports investigating regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe, over time. A set of regulations affecting 9 stages of a business's life are measured: starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2011 are current as of June 1, 2010*. The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why. The Doing Business methodology has limitations. Other areas important to business such as an economy 's proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions, are not studied directly by Doing Business. To make the data comparable across economies, the indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policymakers in designing reform. The data set covers 183 economies: 46 in Sub-Saharan Africa, 32 in Latin America and the Caribbean, 25 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 18 in the Middle East and North Africa and 8 in South Asia, as well as 30 OECD high-income economies. The following pages present the summary Doing Business indicators for Palau. The data used for this economy profile come from the Doing Business database and are summarized in graphs. These graphs allow a comparison of the economies in each region not only with one another but also with the "good practice" economy for each indicator. The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good -practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10. More information is available in the full report. Doing Business 2011 : Making a Difference for Entrepreneurs presents the indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with information on ordering the report, are available on the Doing Business website (www.doingbusiness.org). * Except for the Paying Taxes indicator that refers to the period January to December of 2009. Note: 2008-2010 Doing Business data and rankings have been recalculated to reflect changes to the methodology and the addition of new economies (in the case of the rankings). 1 Economy Rankings - Ease of Doing Business Palau is ranked 120 out of 183 economies. Singapore is the top ranked economy in the Ease of Doing Business. Palau - Compared to global good practice economy as well as selected economies: Palau's ranking in Doing Business 2011 Rank Doing Business 2011 Ease of Doing Business 120 Starting a Business 105 Dealing with Construction Permits 54 Registering Property 20 Getting Credit 183 Protecting Investors 173 Paying Taxes 89 Trading Across Borders 121 Enforcing Contracts 145 Closing a Business 60 2 Summary of Indicators - Palau Starting a Business Procedures (number) 8 Time (days) 28 Cost (% of income per capita) 4.2 Min. capital (% of income per capita) 11.2 Dealing with Construction Permits Procedures (number) 25 Time (days) 118 Cost (% of income per capita) 5.1 Registering Property Procedures (number) 5 Time (days) 14 Cost (% of property value) 0.3 Getting Credit Strength of legal rights index (0-10) 0 Depth of credit information index (0-6) 0 Public registry coverage (% of adults) 0.0 Private bureau coverage (% of adults) 0.0 Protecting Investors Extent of disclosure index (0-10) 0 Extent of director liability index (0-10) 0 Ease of shareholder suits index (0-10) 8 Strength of investor protection index (0-10) 2.7 Paying Taxes Payments (number per year) 19 Time (hours per year) 128 Profit tax (%) 65.9 Labor tax and contributions (%) 6.5 Other taxes (%) 0.5 Total tax rate (% profit) 73.0 Trading Across Borders Documents to export (number) 6 Time to export (days) 29 Cost to export (US$ per container) 1070 Documents to import (number) 10 Time to import (days) 33 Cost to import (US$ per container) 1022 3 Enforcing Contracts Procedures (number) 38 Time (days) 885 Cost (% of claim) 35.3 Closing a Business Recovery rate (cents on the dollar) 37.9 Time (years) 1.0 Cost (% of estate) 23 The 5 year measure of cumulative change illustrates how the business regulatory environment has changed in 174 economies from Doing Business 2006 to Doing Business 2011. Instead of highlighting which countries currently have the most business friendly environment, this new approach shows the extent to which an economy's regulatory environment for business has changed compared with 5 years ago. This snapshot reflects all cumulative changes in an economy's business regulation as measured by the Doing Business indicators-such as a reduction in the time to start a business thanks to a one-stop shop or an increase in the strength of investor protection index thanks to new stock exchange rules that tighten disclosure requirements for related -party transactions. This figure shows the distribution of cumulative change across the 9 indicators and time between Doing Business 2006 and Doing Business 2011 0.06 0.05 Doing 0.04 business has become easier (DB 0.03 change score) 0.02 0.01 Doing business has 0.00 become more difficult or more -0.01 Solomon Micronesia, Marshall Samoa Kiribati Palau costly Islands Fed. Sts. Islands 6 1. Benchmarking Starting a Business Regulations: Palau is ranked 105 overall for Starting a Business. Ranking of Palau in Starting a Business - Compared to good practice and selected economies: 7 The following table shows Starting a Business data for Palau compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of Min. capital (number) income per (% of income Economies capita) per capita) Denmark* 0.0 New Zealand* 1 1 0.0 Selected Economy Palau 8 28 4.2 11.2 Comparator Economies Kiribati 6 21 40.2 21.7 Marshall Islands 5 17 17.3 0.0 Micronesia, Fed. Sts. 7 16 150.5 0.0 Samoa 5 9 9.8 0.0 Solomon Islands 7 57 68.1 0.0 * The following economies are also good practice economies for : Procedures (number): Canada Cost (% of income per capita): Slovenia 8 2. Historical data: Starting a Business in Palau Starting a Business data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 106 105 Procedures (number) 8 8 8 8 Time (days) 28 28 28 28 Cost (% of income per capita) 4.7 4.6 4.3 4.2 Min. capital (% of income per capita) 12.5 12.2 11.6 11.2 3. The following graphs illustrate the Starting a Business sub indicators in Palau over the past 4 years: 9 Starting a Business Summary - Palau This table summarizes the procedures and costs associated with setting up a business in Palau. STANDARDIZED COMPANY Legal Form: Private Limited Liability Company City: Koror Registration Requirements: No: Procedure Time to complete Cost to complete 1 Deposit the legally required capital in a bank and obtain deposit 1 no charge evidence 2 Check the uniqueness of the proposed company name and reserve a 1 no charge name 3 Notarize the company deeds 1 USD 10 4 Pay the registration fee at the National Treasury 1 USD 250 5 Register the company with the Corporate Registrar at the Office of the 14 no charge Attorney General; obtain a certificate of incorporation 6 Register employees for social security and obtain an employer 1 USD 15 identification number (EIN) 7 Apply for a business license from the relevant licensing authority 5 USD 50 10 8 Apply for a business license from the state government 4 USD 50 11 Starting a Business Details - Palau Procedure 1 Deposit the legally required capital in a bank and obtain deposit evidence Time to complete: 1 Cost to complete: no charge Comment: Under the Money Laundering and Proceeds of Crime Act of 2001, a corporate bank account cannot be opened until incorporation documents are issued. Accordingly, the incorporator must first either open an account in his name or deposit the initial capital in the trust account of his attorney for the corporation. Incorporators must obtain proof of payment in the form of a bank statement, receipt, or other documentation of the amount paid into the company as paid-in capital. Procedure 2 Check the uniqueness of the proposed company name and reserve a name Time to complete: 1 Cost to complete: no charge Comment: The uniqueness of the proposed company name can be checked over the phone. The Corporate Registrar at the Office of the Attorney General searches the name index. In practice, few incorporators search for a company name before incorporating. Because Palau has no trademark statute, there are limited avenues for enforcement. Procedure 3 Notarize the company deeds Time to complete: 1 Cost to complete: USD 10 Comment: Section 2.1 of the Corporations Regulations for the Republic of Palau requires that "any number of persons not less than three desiring to form a corporation shall execute articles of incorporation and acknowledge the same before a Clerk of the Supreme Court of the Republic or a notary public." Attorneys generally prepare the incorporation documents. If professional services are used, this adds USD 1,000 to the process. The articles of incorporation must contain (a) the company name; (b) place; (c) purpose; (d) shares; (e) directors; (f) duration; (g) incorporators; (h) voting; (i) disposition; (j) liquidation; (k) amendments; (l) ownership, and (m) foreign ownership. A shareholder affidavit must be notarized and set forth the following: (a) the number of authorized shares of each class; (b) the par value of the shares; (c) the names of subscribers for shares of each class; (d) the number of shares of each class subscribed to by each subscriber; and (e) the subscription price or prices for the shares of each class subscribed. Procedure 4 Pay the registration fee at the National Treasury Time to complete: 1 Cost to complete: USD 250 12 Comment: Procedure 5 Register the company with the Corporate Registrar at the Office of the Attorney General; obtain a certificate of incorporation Time to complete: 14 Cost to complete: no charge Comment: The time between when the company submits the documents to the Corporate Registrar to when the Office of the President issues the charter is about 2 weeks. This time varies, however, depending on (a) how long charter issuance takes once the OCR approves the documents; (b) if there are errors in the corporate documents; and if so, (c) the time required to correct any errors. Procedure 6 Register employees for social security and obtain an employer identification number (EIN) Time to complete: 1 Cost to complete: USD 15 Comment: Companies must register with the Office of Social Security for payment of social security tax withheld from employees. All employers or self-employed persons doing business in Palau must apply for an employer identification number (EIN) from the Social Security Administration. The applicant completes the Application for Employer Number form and pays the applicable fee (USD 15 for first-time employers, USD 10 for renewing employers). The Palau Social Security Administration will assign the applicant an employer identification number (EIN), which must be entered on the employer's quarterly tax returns. The EIN is required to apply for a business license from the Division of Revenue and Taxation. Procedure 7 Apply for a business license from the relevant licensing authority Time to complete: 5 Cost to complete: USD 50 Comment: Before a person or a firm engages in business, they must apply for a business license from the Division of Revenue and Taxation, State Government. Previously, companies were licensed by entity, but starting in 2007, companies must obtain a license for each establishment (store). Procedure 8 Apply for a business license from the state government Time to complete: 4 Cost to complete: USD 50 Comment: The Koror state government requires a state business license. The following license fees apply: - USD 50: For each retail store (Class A), movie theater, building contractor, furniture manufacturer, and boat building and repair shop association or corporation. - USD 40: For each scrap-metal-collecting business. - USD 30: For each retail store (Class B) and each nonassociated or nonincorporated boat building and repair shop. Other classes and their respective fees apply to other businesses 13 14 1. Benchmarking Dealing with Construction Permits Regulations: Palau is ranked 54 overall for Dealing with Construction Permits. Ranking of Palau in Dealing with Construction Permits - Compared to good practice and selected economies: 15 The following table shows Dealing with Construction Permits data for Palau compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) income per Economies capita) Denmark 6 Qatar 0.8 Singapore 25 Selected Economy Palau 25 118 5.1 Comparator Economies Kiribati 14 160 446.5 Marshall Islands 10 55 36.0 Micronesia, Fed. Sts. 14 73 19.2 Samoa 18 88 78.7 Solomon Islands 12 62 665.4 16 2. Historical data: Dealing with Construction Permits in Palau Dealing with Construction Permits data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 53 54 Procedures (number) 25 25 25 25 Time (days) 118 118 118 118 Cost (% of income per capita) 6.1 5.9 5.4 5.1 3. The following graphs illustrate the Dealing with Construction Permits sub indicators in Palau over the past 4 years: 17 Dealing with Construction Permits in Palau The table below summarizes the procedures, time, and costs to build a warehouse in Palau. BUILDING A WAREHOUSE City: Koror Registration Requirements: No: Procedure Time to complete Cost to complete 1 Visit the Koror State Planning Commission to obtain an application form 1 day no charge for a Building and Zoning Permit 2 Request a clearance from the Land Authority 1 day no charge 3 Receive inspection and obtain clearance from the Land Authority 1 day no charge 4 Request a historic preservation clearance from the Bureau of Arts and 1 day no charge Culture 5 Receive inspection and clearance from the Bureau of Arts and Culture 1 day no charge 6 Request a clearance from the Environmental Quality Preservation Board 1 day USD 100 (EQPB) 7 Receive inspection by the Environmental Quality Preservation Board 1 day no charge (EQPB) 18 8 Obtain the clearance from the Environmental Quality Preservation Board 14 days no charge (EQPB) 9 Request clearance on utilities from the Public Works Authority 1 day no charge 10 Receive inspection and clearance from the Public Works Authority 1 day no charge 11 Request clearance from the Palau National Communication Co. 1 day no charge 12 Receive inspection and clearance from the Palau National Communication 1 day no charge Co. 13 Request and obtain a building permit from the Koror State Planning 24 days USD 85 Commission 14 Receive pre-construction inspection by the State Planning Commission 1 day no charge 15 Receive foundation inspection by the State Planning Commission 1 day no charge 16 Receive inspection on surroundings 1 day no charge 17 Receive inspection on structure 1 day no charge 18 Request an occupancy permit 1 day no charge 19 Receive final inspection 1 day no charge 20 Obtain occupancy permit 1 day no charge 21 Request electricity connection 1 day USD 150 22 * Receive inspection to examine the location and obtain cost estimates for 1 day no charge electricity connection 23 * Connect to electricity 60 days no charge 24 * Request and connect to water and sewage services 1 day USD 30 25 * Request and connect to telephone services 14 days USD 120 * Takes place simultaneously with another procedure. 19 Dealing with Construction Permits Details - Palau Procedure 1 Visit the Koror State Planning Commission to obtain an application form for a Building and Zoning Permit Time to complete: 1 day Cost to complete: no charge Agency: Koror State Planning Commission Comment: The application form has two pages: the first one contains information about the building, while the second indicates the clearances to be signed by the following agencies: - Land authority. - Bureau of Arts and Culture. - Environmental protection authority. - Public works (for utilities). - Palau National Communication Company (PNCC). Procedure 2 Request a clearance from the Land Authority Time to complete: 1 day Cost to complete: no charge Agency: National Bureau of Land & Survey Comment: Public land should be cleared by the Koror State Public Land Authority. Private land should be cleared by the National Bureau of Land and Survey. The authority will inspect the land to confirm ownership and boundary. Procedure 3 Receive inspection and obtain clearance from the Land Authority Time to complete: 1 day Cost to complete: no charge Agency: National Bureau of Land & Survey Comment: Procedure 4 Request a historic preservation clearance from the Bureau of Arts and Culture Time to complete: 1 day Cost to complete: no charge Agency: Bureau of Arts and Culture Comment: Before the beginning of any project that involves earthmoving or alteration or demolition of a historic property, a historic clearance permit must be obtained from the Bureau of Arts and Culture. An application for historic clearance, available at the Bureau of Arts and Culture, must be completely filled out, signed, and submitted with a location map, plot map, construction plan, excavation and grading plan, and any additional pertinent documents. An official inspects and assesses the land. If the building is on previously developed land, the process is faster. 20 Procedure 5 Receive inspection and clearance from the Bureau of Arts and Culture Time to complete: 1 day Cost to complete: no charge Agency: Bureau of Arts and Culture Comment: Procedure 6 Request a clearance from the Environmental Quality Preservation Board (EQPB) Time to complete: 1 day Cost to complete: USD 100 Agency: Environmental Quality Preservation Board (EQPB) Comment: Any construction project that involves earthmoving needs an approval from the Environmental Quality Preservation Board (EQPB), which will inspect the building site. In some instances, according to EQPB Regulation No. 240161, an environmental assessment or an environmental impact statement should be obtained. An environmental assessment can be completed in months; an environmental impact statement could take a year or more. Last, projects must go through an EQPB board meeting, which is held every other Thursday. Procedure 7 Receive inspection by the Environmental Quality Preservation Board (EQPB) Time to complete: 1 day Cost to complete: no charge Agency: Environmental Quality Preservation Board (EQPB) Comment: Procedure 8 Obtain the clearance from the Environmental Quality Preservation Board (EQPB) Time to complete: 14 days Cost to complete: no charge Agency: Environmental Quality Preservation Board (EQPB) Comment: Procedure 9 Request clearance on utilities from the Public Works Authority Time to complete: 1 day Cost to complete: no charge 21 Agency: Public Works Authority Comment: The Public Works Authority checks plumbing system and the distance between the building and the public line. Procedure 10 Receive inspection and clearance from the Public Works Authority Time to complete: 1 day Cost to complete: no charge Agency: Public Works Authority Comment: Procedure 11 Request clearance from the Palau National Communication Co. Time to complete: 1 day Cost to complete: no charge Agency: Palau National Communication Co. Comment: Procedure 12 Receive inspection and clearance from the Palau National Communication Co. Time to complete: 1 day Cost to complete: no charge Agency: Palau National Communication Co. Comment: Procedure 13 Request and obtain a building permit from the Koror State Planning Commission Time to complete: 24 days Cost to complete: USD 85 Agency: Koror State Planning Commission Comment: The board meets on the last Wednesday of every month. The officials inspect the site to verify the submitted information. It takes at least 10 days for the authority to confirm whether the file is complete. The building permit is valid for 2 years. Time varies from a week to 2 months; for commercial development, it is 15­30 days. The cost of a building permit for three types of construction is as follows : - Type X (less than USD 10,000): USD 10 from 0 USD to USD 1,000, USD 5 for each additional USD 1,000. - Type Y (USD 10,000 to USD 50,000): USD 10 from 0 to USD 1,000, USD 2 for each additional USD 1,000. 22 - Type Z (over USD 50,000): USD 10 from 0 to USD 1,000, USD 1 for each additional USD 1,000. Procedure 14 Receive pre-construction inspection by the State Planning Commission Time to complete: 1 day Cost to complete: no charge Agency: State Planning Commission Comment: According to the State Planning Commission, at least four inspections are normally carried out before construction starts and during construction: inspections of the foundation, inspections of the surroundings and structure of the building, and final inspection. Procedure 15 Receive foundation inspection by the State Planning Commission Time to complete: 1 day Cost to complete: no charge Agency: State Planning Commission Comment: Procedure 16 Receive inspection on surroundings Time to complete: 1 day Cost to complete: no charge Agency: State Planning Commission Comment: Procedure 17 Receive inspection on structure Time to complete: 1 day Cost to complete: no charge Agency: State Planning Commission Comment: Procedure 18 Request an occupancy permit Time to complete: 1 day Cost to complete: no charge Agency: State Planning Commission 23 Comment: Procedure 19 Receive final inspection Time to complete: 1 day Cost to complete: no charge Agency: State Planning Commission Comment: Procedure 20 Obtain occupancy permit Time to complete: 1 day Cost to complete: no charge Agency: State Planning Commission Comment: Procedure 21 Request electricity connection Time to complete: 1 day Cost to complete: USD 150 Agency: Palau Utility Corporation (PUC) Comment: BuildCo obtains a checklist of the things to do. When all this has been completed, a Power Company (PUC) inspector checks the site and estimates loads and costs. Procedure 22 Receive inspection to examine the location and obtain cost estimates for electricity connection Time to complete: 1 day Cost to complete: no charge Agency: Palau Utility Corporation (PUC) Comment: Procedure 23 Connect to electricity Time to complete: 60 days Cost to complete: no charge Agency: Palau Utility Corporation (PUC) 24 Comment: Procedure 24 Request and connect to water and sewage services Time to complete: 1 day Cost to complete: USD 30 Agency: National Public Works Department, Water unit, Ministry of Resources Comment: The agency in charge is the National Public Works Department, Water Unit, Ministry of Resources. The documents needed to apply for water connection include a map and land location. The application fee is USD 15 for residential establishments and USD 30 for commercial establishments. A specialized meter fee must also be determined. Procedure 25 Request and connect to telephone services Time to complete: 14 days Cost to complete: USD 120 Agency: Palau National Communication Co. Comment: An application form is submitted at the office of Palau National Communication Co. 25 26 1. Benchmarking Registering Property Regulations: Palau is ranked 20 overall for Registering Property. Ranking of Palau in Registering Property - Compared to good practice and selected economies: 27 The following table shows Registering Property data for Palau compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) property Economies value) New Zealand* 2 Norway* 1 Saudi Arabia 0.0 Selected Economy Palau 5 14 0.3 Comparator Economies Kiribati 5 513 0.0 Marshall Islands no practice no practice no practice Micronesia, Fed. Sts. no practice no practice no practice Samoa 5 27 1.6 Solomon Islands 10 297 4.9 * The following economies are also good practice economies for : Procedures (number): United Arab Emirates Time (days): Saudi Arabia, Thailand, United Arab Emirates 28 2. Historical data: Registering Property in Palau Registering Property data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 18 20 Procedures (number) 5 5 5 5 Time (days) 14 14 14 14 Cost (% of property value) 0.4 0.4 0.3 0.3 3. The following graphs illustrate the Registering Property sub indicators in Palau over the past 4 years: 29 Registering Property in Palau This topic examines the steps, time, and cost involved in registering property in Palau. STANDARDIZED PROPERTY Property Value: 472,827.70 City: Koror Registration Requirements: No: Procedure Time to complete Cost to complete 1 An attorney investigates the land title 7 days $250-$2,000 2 An attorney prepares a lease 1 day $300 3 Notarize the document at the court 1 day $3 per signature (x 4 for parties and their representatives) 4 Record the lease with Clerk of Court 1 day $5 5 Register the new title at the Land Court 3-5 days no fee 30 Registering Property Details - Palau Procedure 1 An attorney investigates the land title Time to complete: 7 days Cost to complete: $250-$2,000 Comment: It is not mandatory to do the title research. However, it is highly recommended as land disputes are very common and only less than half the land is surveyed with certificate of title issued. Land title records are kept on paper, not sorted by parcel number. As a result, one has to go through thousands of pages to track transactions on a certain piece of land. Attorneys are usually willing to provide due diligence for one week, but will stipulate in their contract with clients that the search has not guaranteed them that no disputes or liens are attached to the title. Procedure 2 An attorney prepares a lease Time to complete: 1 day Cost to complete: $300 Comment: It is standard practice for an attorney to draft land deeds and leases. It is very rare that companies buy or sell ownership of land and building as the records are so unreliable. In most cases, such as this one, companies would transfer a lease. Procedure 3 Notarize the document at the court Time to complete: 1 day Cost to complete: $3 per signature (x 4 for parties and their representatives) Agency: Court Comment: Procedure 4 Record the lease with Clerk of Court Time to complete: 1 day Cost to complete: $5 Agency: Court Comment: Procedure 5 Register the new title at the Land Court Time to complete: 3-5 days 31 Cost to complete: no fee Agency: Court Comment: In case of change of ownership, the parties turn in the "warranty deed" and old title, and obtain a new title. 32 33 1. Benchmarking Getting Credit Regulations: Palau is ranked 183 overall for Getting Credit. Ranking of Palau in Getting Credit - Compared to good practice and selected economies: 34 The following table shows Getting Credit data for Palau compared to good practice and comparator economies: Good Practice Strength of Depth of Public Private legal rights credit registry bureau Economies index (0-10) information coverage (% coverage (% index (0-6) of adults) of adults) New Zealand* 100.0 Portugal 67.1 Singapore* 10 United Kingdom 6 Selected Economy Palau 0 0 0.0 0.0 Comparator Economies Kiribati 5 0 0.0 0.0 Marshall Islands 8 0 0.0 0.0 Micronesia, Fed. Sts. 7 0 0.0 0.0 Samoa 6 0 0.0 0.0 Solomon Islands 8 0 0.0 0.0 * The following economies are also good practice economies for : Strength of legal rights index (0-10): Hong Kong, China, Kenya, Kyrgyz Republic, Malaysia Private bureau coverage (% of adults): Argentina, Australia, Canada, Iceland, Ireland, Norway, Sweden, United Kingdom, United States 27 countries have the highest credit information index. 35 2. Historical data: Getting Credit in Palau Getting Credit data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 183 183 Strength of legal rights index (0-10) 0 0 0 0 Depth of credit information index (0-6) 0 0 0 0 Private bureau coverage (% of adults) 0.0 0.0 0.0 0.0 Public registry coverage (% of adults) 0.0 0.0 0.0 0.0 3. The following graphs illustrate the Getting Credit sub indicators in Palau over the past 4 years: 36 Getting Credit in Palau The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in Palau. Getting Credit Indicators (2010) Indicator Private credit Public credit Private bureau coverage (% of adults) 0 bureau registry Are data on both firms and individuals distributed? No No 0 Are both positive and negative data distributed? No No 0 Does the registry distribute credit information from retailers, trade No No 0 creditors or utility companies as well as financial institutions? Are more than 2 years of historical credit information distributed? No No 0 Is data on all loans below 1% of income per capita distributed? No No 0 Is it guaranteed by law that borrowers can inspect their data in the No No 0 largest credit registry? Coverage 0.0 0.0 Number of individuals 0 0 Number of firms 0 0 37 Strength of legal rights index (0-10) 0 Can any business use movable assets as collateral while keeping possession of the assets; and any financial No institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, No without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without No requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, No proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations No and debts can be secured by stating a maximum amount rather than a specific amount between the parties ? Is a collateral registry in operation, that is unified geographically and by asset type, as well as indexed by the No grantor's name of a security right ? Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? No Do secured creditors have absolute priority to their collateral in bankruptcy procedures? No During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? No Does the law authorize parties to agree on out of court enforcement? No 38 39 1. Benchmarking Protecting Investors Regulations: Palau is ranked 173 overall for Protecting Investors. Ranking of Palau in Protecting Investors - Compared to good practice and selected economies: 40 The following table shows Protecting Investors data for Palau compared to good practice and comparator economies: Good Practice Strength of investor Economies protection index (0-10) New Zealand 9.7 Selected Economy Palau 2.7 Comparator Economies Kiribati 6.0 Marshall Islands 3.3 Micronesia, Fed. Sts. 2.7 Samoa 6.3 Solomon Islands 5.7 41 2. Historical data: Protecting Investors in Palau Protecting Investors data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 172 173 Strength of investor protection index (0-10) 2.7 2.7 2.7 2.7 3. The following graph illustrates the Protecting Investors index in Palau compared to best practice and selected Economies: 9.7 6.3 6.0 5.7 3.3 2.7 2.7 i at nd on oa nd u nd ll St ia, ib Is lom la sha la m d. es ir a s Pa Sa al K s Fe ron ar s. So Ze la M ic ew Is M N Note: The higher the score, the greater the investor protection. 42 Protecting Investors in Palau The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are calculated in Palau. Protecting Investors Data (2010) Indicator Extent of disclosure index (0-10) 0 0 What corporate body provides legally sufficient approval for the transaction? 0 Whether immediate disclosure of the transaction to the public and/or shareholders is required? 0 Whether disclosure of the transaction in published periodic filings (annual reports) is required? 0 Whether disclosure of the conflict of interest by Mr. James to the board of directors is required? 0 Whether an external body must review the terms of the transaction before it takes place? Extent of director liability index (0-10) 0 0 Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller transaction causes to the company? 0 Whether shareholders can hold the approving body (the CEO or board of directors) liable for the damage that the Buyer-Seller transaction causes to the company? 0 Whether a court can void the transaction upon a successful claim by a shareholder plaintiff? 0 Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff? 43 0 Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff? 0 Whether fines and imprisonment can be applied against Mr. James? 0 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction causes to the company? Ease of shareholder suits index (0-10) 8 4 Whether the plaintiff can obtain any documents from the defendant and witnesses during trial? 2 Whether the plaintiff can directly question the defendant and witnesses during trial? 1 Whether the plaintiff can request categories of documents from the defendant without identifying specific ones? 0 Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the transaction? 1 Whether the level of proof required for civil suits is lower than that of criminal cases? 0 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before filing suit? Strength of investor protection index (0-10) 2.7 44 45 1. Benchmarking Paying Taxes Regulations: Palau is ranked 89 overall for Paying Taxes. Ranking of Palau in Paying Taxes - Compared to good practice and selected economies: 46 The following table shows Paying Taxes data for Palau compared to good practice and comparator economies: Good Practice Payments Time (hours Total tax rate (number per per year) (% profit) Economies year) Maldives* 3 0 Timor-Leste 0.2 Selected Economy Palau 19 128 73.0 Comparator Economies Kiribati 7 120 31.8 Marshall Islands 21 128 64.9 Micronesia, Fed. Sts. 21 128 58.7 Samoa 37 224 18.9 Solomon Islands 33 80 36.4 * The following economies are also good practice economies for : Payments (number per year): Qatar 47 2. Historical data: Paying Taxes in Palau Paying Taxes data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 89 89 Total tax rate (% profit) 73.0 73.0 73.0 73.0 Payments (number per year) 19 19 19 19 Time (hours per year) 128 128 128 128 3. The following graphs illustrate the Paying Taxes sub indicators in Palau over the past 4 years: 48 Paying Taxes in Palau The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year in Palau, as well as measures of administrative burden in paying taxes. Tax or mandatory Payments Notes on Time Statutory tax Tax Totaltax rate Notes on contribution (number) Payments (hours) rate base (% profit) TTR Road tax 1 150/kg vehicle 0.00 weight Business license 1 fixed fee 0.00 ($50) Fuel tax 1 fuel 0.50 consumption Social security 12 96 6.0% gross salaries 6.50 contributions Gross revenue tax 4 32 4.0% revenue 65.90 minus labor costs Totals 19 128 73.0 49 50 1. Benchmarking Trading Across Borders Regulations: Palau is ranked 121 overall for Trading Across Borders. Ranking of Palau in Trading Across Borders - Compared to good practice and selected economies: 51 The following table shows Trading Across Borders data for Palau compared to good practice and comparator economies: Good Practice Documents to Time to Cost to Documents to Time to Cost to export export (days) export (US$ import import (days) import (US$ Economies (number) per (number) per container) container) Denmark* 5 France 2 2 Malaysia 450 Singapore 4 439 Selected Economy Palau 6 29 1070 10 33 1022 Comparator Economies Kiribati 6 21 1070 7 21 1070 Marshall Islands 5 21 945 5 33 945 Micronesia, Fed. Sts. 3 30 1295 6 30 1295 Samoa 7 27 820 7 31 848 Solomon Islands 7 24 1023 4 21 1237 * The following economies are also good practice economies for : Time to export (days): Estonia 52 2. Historical data: Trading Across Borders in Palau Trading Across Borders data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 127 121 Cost to export (US$ per container) 1160 1170 1190 1070 Cost to import (US$ per container) 1110 1132 1132 1022 Documents to export (number) 6 6 6 6 Documents to import (number) 10 10 10 10 Time to export (days) 29 29 29 29 Time to import (days) 35 33 33 33 3. The following graphs illustrate the Trading Across Borders sub indicators in Palau over the past 4 years: 53 54 Trading Across Borders in Palau These tables list the procedures necessary to import and export a standardized cargo of goods in Palau. The documents required to export and import the goods are also shown. Nature of Export Procedures (2010) Duration (days) US$ Cost Documents preparation 14 380 Customs clearance and technical control 1 50 Ports and terminal handling 12 310 Inland transportation and handling 2 330 Totals 29 1070 Nature of Import Procedures (2010) Duration (days) US$ Cost Documents preparation 14 390 Customs clearance and technical control 3 50 Ports and terminal handling 14 260 Inland transportation and handling 2 322 Totals 33 1022 55 Documents for Export and Import Export Bill of lading Customs export declaration Export license Packing list Preferential certificate Technical standard/health certificate Import Bill of lading Commercial invoice Customs import declaration Import license Inspection report Preferential certificate Pre-shipment inspection clean report of findings Tax certificate Technical standard/health certificate Terminal handling receipts 56 57 1. Benchmarking Enforcing Contracts Regulations: Palau is ranked 145 overall for Enforcing Contracts. Ranking of Palau in Enforcing Contracts - Compared to good practice and selected economies: 58 The following table shows Enforcing Contracts data for Palau compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) claim) Economies Bhutan 0.1 Ireland 20 Singapore 150 Selected Economy Palau 38 885 35.3 Comparator Economies Kiribati 32 660 25.8 Marshall Islands 36 476 27.4 Micronesia, Fed. Sts. 34 965 66.0 Samoa 44 455 19.7 Solomon Islands 37 455 78.9 59 2. Historical data: Enforcing Contracts in Palau Enforcing Contracts data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 146 145 Procedures (number) 38 38 38 38 Time (days) 885 885 885 885 Cost (% of claim) 35.3 35.3 35.3 35.3 3. The following graphs illustrate the Enforcing Contracts sub indicators in Palau over the past 4 years: 60 Enforcing Contracts in Palau This topic looks at the efficiency of contract enforcement in Palau. Nature of Procedure (2010) Indicator Procedures (number) 38 Time (days) 885 Filing and service 120.0 Trial and judgment 400.0 Enforcement of judgment 365.0 Cost (% of claim)* 35.30 Attorney cost (% of claim) 33.9 Court cost (% of claim) 0.7 Enforcement Cost (% of claim) 0.7 61 Court information: Koror Supreme Court, Trial Division * Claim assumed to be equivalent to 200% of income per capita. 62 63 1. Benchmarking Closing Business Regulations: Palau is ranked 60 overall for Closing a Business. Ranking of Palau in Closing Business - Compared to good practice and selected economies: 64 The following table shows Closing Business data for Palau compared to good practice and comparator economies: Good Practice Recovery rate Time (years) Cost (% of (cents on the estate) Economies dollar) Ireland 0.4 Japan 92.7 Singapore* 1 Selected Economy Palau 37.9 1.0 23 Comparator Economies Kiribati 0.0 no practice no practice Marshall Islands 17.9 2.0 38 Micronesia, Fed. Sts. 3.2 5.3 38 Samoa 14.6 2.5 38 Solomon Islands 23.4 1.0 38 * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 65 2. Historical data: Closing Business in Palau Closing a Business data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 59 60 Time (years) 1.0 1.0 1.0 1.0 Cost (% of estate) 23 23 23 23 Recovery rate (cents on the dollar) 38.2 38.2 38.2 37.9 3. The following graphs illustrate the Closing Business sub indicators in Palau over the past 4 years: 66 Since 2004 Doing Business has been tracking reforms aimed at simplifying business regulations, strengthening property rights, opening access to credit and enforcing contracts by measuring their impact on 10 indicator sets . * Nearly 1,000 reforms have had an impact on these indicators. Doing Business 2011, covering June 2009 to June 2010, reports that 117 economies implemented 216 reforms to make it easier to start a business. 64% of economies measured by Doing Business have reformed this year, focusing on easing business start-up, lightening the tax burden, simplifying import and export regulations and improving credit information systems. The top 10 most-improved in Doing Business 2011 Dealing with Construction Trading Across Borders Positive Change Registering Property Enforcing Contracts Protecting Investors Starting a Business Closing a Business Negative Change Getting Credit Paying Taxes Permits Economy Kazakhstan Rwanda Peru Vietnam Cape Verde Tajikistan Zambia Hungary Grenada Brunei Darussalam * For Doing Business 2011 the Employing Workers indicator is not included in the aggregate ease of doing business ranking. 67 Summary of changes to business regulation in top 10 most improved economies in Doing Business 2011 and selected comparator economies. Brunei Darussalam Brunei Darussalam made starting a business easier by improving efficiency at the company registrar and implementing an electronic system for name searches. Brunei Darussalam reduced the corporate income tax rate from 23.5% to 22% while also introducing a lower tax rate for small businesses, ranging from 5.5% to 11%. The introduction of an electronic customs system in Brunei Darussalam made trading easier. Cape Verde Cape Verde made start-up easier by eliminating the need for a municipal inspection before a business begins operations and computerizing the system for delivering the municipal license. Cape Verde eased property registration by switching from fees based on a percentage of the property value to lower fixed rates. Cape Verde abolished the stamp duties on sales and checks. Grenada Grenada eased business start-up by transferring responsibility for the commercial registry from the courts to the civil administration. The appointment of a registrar focusing only on property cut the time needed to transfer property in Grenada by almost half. Grenada's customs administration made trading faster by simplifying procedures, reducing inspections, improving staff training and enhancing communication with users. Hungary Hungary implemented a time limit for the issuance of building permits. Hungary reduced the property registration fee by 6% of the property value. Hungary simplified taxes and tax bases. Amendments to Hungary's bankruptcy law encourage insolvent companies to consider reaching agreements with creditors out of court so as to avoid bankruptcy. Kazakhstan Kazakhstan eased business start-up by reducing the minimum capital requirement to 100 tenge ($0.70) and eliminating the need to have the memorandum of association and company charter notarized. Kazakhstan made dealing with construction permits easier by implementing a one-stop shop related to technical conditions for utilities. Kazakhstan strengthened investor protections by requiring greater corporate disclosure in company annual reports. Kazakhstan speeded up trade through efforts to modernize customs, including implementation of a risk management system and improvements in customs automation. Marshall Islands 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 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. Peru Peru eased business start-up by simplifying the requirements for operating licenses and creating an online one-stop shop for business registration. Peru streamlined construction permitting by implementing administrative reforms. Peru introduced fast-track procedures at the land registry, cutting by half the time needed to register property. Peru made trading easier by implementing a new web-based electronic data interchange system, risk-based inspections and payment deferrals. Rwanda Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and implementing new time limits for the issuance of various permits. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that loans of all sizes be reported to the central bank's public credit registry. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with Uganda and other neighbors, leading to an improvement in the trade logistics environment. Samoa Samoa shifted from a deed system to a title system and fully computerized its land registry, which reduced the time required to register property by 4 months. Solomon Islands 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 description of debts and obligations secured by collateral, permits out-of-court enforcement and creates a collateral registry. Tajikistan Tajikistan made starting a business easier by creating a one-stop shop that consolidates registration with the state and the tax authority. Tajikistan strengthened investor protections by requiring greater corporate disclosure in the annual report and greater access to corporate information for minority investors. Tajikistan lowered its corporate income tax rate. 68 Vietnam Vietnam eased company start-up by creating a one-stop shop that combines the processes for obtaining a business license and tax license and by eliminating the need for a seal for company licensing. Vietnam made dealing with construction permits easier by reducing the cost to register newly completed buildings by 50% and transferring the authority to register buildings from local authorities to the Department of National Resources and Environment. Vietnam improved its credit information system by allowing borrowers to examine their own credit report and correct errors. Zambia Zambia eased business start-up by eliminating the minimum capital requirement. Zambia eased trade by implementing a one-stop border post with Zimbabwe, launching web-based submission of customs declarations and introducing scanning machines at border posts. Zambia improved contract enforcement by introducing an electronic case management system in the courts that provides electronic referencing of cases, a database of laws, real-time court reporting and public access to court records. 69 70