50566 Doing Business 2010 Norway © 2009 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, D.C. 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail feedback@worldbank.org All rights reserved. 1 2 3 4 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. 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Additional copies of 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: 978-0-8213-7961-5 E-ISBN: 978-0-8213-7965-3 DOI: 10.1596/978-0-8213-7961-5 ISSN: 1729-2638 Library of Congress Cataloging-in-Publishing Data has been applied for. Printed in the United States. Current features News on the Doing Business project www.doingbusiness.org Rankings How economies rank-from 1 to 183 www.doingbusiness.org/economyrankings Contents Reformers Short summaries of DB2010 reforms, lists of reformers since DB2004 Introduction 1 and a ranking simulation tool and Aggregate Rankings www.doingbusiness.org/reformers Starting a Business 5 Historical data Customized data sets since DB2004 Dealing with www.doingbusiness.org/customquery Construction Permits 10 Methodology and research Employing Workers 15 The methodologies and research papers underlying Doing Business www.doingbusiness.org/MethodologySurveys Registering Property 19 Getting Credit 24 Download reports Access to Doing Business reports as well as subnational and regional reports, reform case studies and customized country and regional Protecting Investors 28 profiles www.doingbusiness.org/downloads Paying Taxes 32 Subnational and regional projects Trading Across Borders 36 Differences in business regulations at the subnational and regional level Enforcing Contracts 40 www.doingbusiness.org/subnational Closing a Business 44 Law Library Online collection of business laws and regulations relating to Doing Business 2010 48 business and gender issues Reforms www.doingbusiness.org/lawlibrary www.doingbusiness.org/genderlawlibrary Local partners More than 8,000 specialists in 183 economies who participate in Doing Business www.doingbusiness.org/LocalPartners Reformers' Club Celebrating the top 10 Doing Business reformers www.doingbusiness.org/Reformers/ReformersClub.aspx Business Planet Interactive map on the ease of doing business http://www.doingbusiness.org/map Doing Business 2010: Reforming Through Difficult Times is the seventh 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 10 stages of a business's life are measured: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2010: Reforming Through Difficult Times are current as of June 1, 2009*. 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, 27 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 19 in the Middle East and North Africa and 8 in South Asia, as well as 27 OECD high-income economies as benchmarks. The following pages present the summary Doing Business indicators for Norway. The data used for this country profile come from the Doing Business database and are summarized in graphs. These graphs allow a comparison of the economies in each region not only with one another but also with the "good practice" economy for each indicator. The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good-practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10. More information is available in the full report. Doing Business 2010: Reforming Through Difficult Times 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 2008. Note: Doing Business 2008 and Doing Business 2009 data and rankings have been recalculated to reflect changes to the methodology and the addition of new countries (in the case of the rankings). 1 Economy Rankings - Ease of Doing Business Norway is ranked 10 out of 183 economies. Singapore is the top ranked economy in the Ease of Doing Business. Norway - Compared to global good practice economy as well as selected economies: Norway's ranking in Doing Business 2010 Rank Doing Business 2010 Ease of Doing Business 10 Starting a Business 35 Dealing with Construction Permits 65 Employing Workers 114 Registering Property 8 Getting Credit 43 Protecting Investors 20 Paying Taxes 17 Trading Across Borders 9 Enforcing Contracts 4 2 Closing a Business 3 Summary of Indicators - Norway Starting a Business Procedures (number) 5 Time (days) 7 Cost (% of income per capita) 1.9 Min. capital (% of income per capita) 18.7 Dealing with Construction Permits Procedures (number) 14 Time (days) 252 Cost (% of income per capita) 41.4 Employing Workers Difficulty of hiring index (0-100) 61 Rigidity of hours index (0-100) 40 Difficulty of redundancy index (0-10) 30 Rigidity of employment index (0-100) 44 Redundancy costs (weeks of salary) 13 Registering Property Procedures (number) 1 Time (days) 3 Cost (% of property value) 2.5 Getting Credit Strength of legal rights index (0-10) 7 Depth of credit information index (0-6) 4 Public registry coverage (% of adults) 0.0 Private bureau coverage (% of adults) 100.0 Protecting Investors Extent of disclosure index (0-10) 7 Extent of director liability index (0-10) 6 Ease of shareholder suits index (0-10) 7 Strength of investor protection index (0-10) 6.7 Paying Taxes Payments (number per year) 4 Time (hours per year) 87 Profit tax (%) 24.4 Labor tax and contributions (%) 15.9 Other taxes (%) 1.3 Total tax rate (% profit) 41.6 4 Trading Across Borders Documents to export (number) 4 Time to export (days) 7 Cost to export (US$ per container) 830 Documents to import (number) 4 Time to import (days) 7 Cost to import (US$ per container) 729 Enforcing Contracts Procedures (number) 33 Time (days) 280 Cost (% of claim) 9.9 Closing a Business Recovery rate (cents on the dollar) 89.0 Time (years) 0.9 Cost (% of estate) 1 When entrepreneurs draw up a business plan and try to get under way, the first hurdles they face are the procedures required to incorporate and register the new firm before they can legally operate. Economies differ greatly in how they regulate the entry of new businesses. In some the process is straightforward and affordable. In others the procedures are so burdensome that entrepreneurs may have to bribe officials to speed up the process or may decide to run their business informally. Analysis shows that burdensome entry regulations do not increase the quality of products, make work safer or reduce pollution. Instead, they constrain private investment; push more people into the informal economy; increase consumer prices and fuel corruption. Methodology The data on starting a business is based on a survey and research investigating the procedures that a standard small to medium -size company needs to complete to start operations legally. This includes obtaining all necessary permits and licenses and completing all required inscriptions, verifications and notifications with authorities to enable the company to formally operate. Procedures are recorded only where interaction is required with an external party. It is assumed that the founders complete all procedures themselves unless professional services (such as by a notary or lawyer) are required by law. Voluntary procedures are not counted, nor are industry­specific requirements and utility hook-ups. Lawful shortcuts are counted. It is assumed that all in formation is readily available to the entrepreneur, that there has been no prior contact with officials and that all government and nongovernment entities involved in the process function without corruption. Survey Case Study The business: is a limited l iability company conducting general commercial activities is located in the largest business city is 100% domestically owned has a start-up capital of 10 times income per capita has a turnover of at least 100 times income per capita has between 10 and 50 employees does not qualify for any special benefits does not own real estate 5 1. Historical data: Starting a Business in Norway Starting a Business data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 25 35 Procedures (number) 5 5 5 Time (days) 7 7 7 Cost (% of income per capita) 2.3 2.1 1.9 Min. capital (% of income per capita) 23.4 21.0 18.7 2. The following graphs illustrates the Starting a Business indicators in Norway over the past 3 years: 6 3. Steps to Starting a Business in Norway It requires 5 procedures, takes 7 days, and costs 1.87 % GNI per capita to start a business in Norway. List of Procedures: 1. Deposit initial capital 2. Have the balance sheet examined by a certified outside auditor 3. Register with the Register of Business Enterprises and file for VAT registration. 4. The employer enrolls in the mandatory workers' injury insurance 5. Arrange for mandatory occupational pension plan for employees More detail is included in the appendix. 7 4. Benchmarking Starting a Business Regulations: Norway is ranked 35 overall for Starting a Business. Ranking of Norway in Starting a Business - Compared to good practice and selected economies: 8 The following table shows Starting a Business data for Norway 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 Norway 5 7 1.9 18.7 Comparator Economies Denmark 4 6 0.0 38.6 Finland 3 14 0.9 7.2 France 5 7 0.9 0.0 Germany 9 18 4.7 0.0 Iceland 5 5 3.0 15.8 * The following economies are also good practice economies for : Procedures (number): Canada Cost (% of income per capita): Slovenia 9 Once entrepreneurs have registered a business, what regulations do they face in operating it? To measure such regulation, Doing Business focuses on the construction sector. Construction companies are under constant pressure from government to comply with i nspections, with licensing and safety regulations, from customers to be quick and cost-effective. These conflicting pressures point to the tradeoff in building regulation; the tradeoff between protecting people (construction workers, tenants, passersby) and keeping the cost of building affordable. In many economies, especially poor ones, complying with building regulations is so costly in time and money that many builders opt out. Builders may pay bribes to pass inspections or simply build illegally, leadi ng to hazardous construction. Where the regulatory burden is large, entrepreneurs may tend to move their activity into the informal economy. There they operate with less concern for safety, leaving everyone worse off. In other economies compliance is simple, straightforward and inexpensive, yielding better results. Methodology The indicators on dealing with construction permits record all procedures officially required for an entrepreneur in the construction industry to build a warehouse. These include su bmitting project documents (building plans, site maps) to the authorities, obtaining all necessary licenses and permits, completing all required notifications and receiving all necessary inspections. They also include procedures for obtaining utility conne ctions, such as electricity, telephone, water and sewerage. The time and cost to complete each procedure under normal circumstances are calculated. All official fees associated with legally completing the procedures are included. Time is recorded in calendar days. The survey assumes that the entrepreneur is aware of all existing regulations and does not use an intermediary to complete the procedures unless required to do so by law. Survey Case Study The business: is a small to medium-size limited liabilit y company is located in the largest business city is domestically owned and operated, in the construction business has 20 qualified employees The warehouse to be built : is a new construction (there was no previous construction on the land) has complete architectural and technical plans prepared by a licensed architect will be connected to electricity, water, sewerage (sewage system, septic tank or their equivalent) and one land phone line. The connection to each utility network will be 32 feet, 10 inches ( 10 meters) long. will be used for general storage, such as of books or stationery. The warehouse will not be used for any goods requiring special conditions, such as food, chemicals or pharmaceuticals. will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements). 10 1. Historical data: Dealing with Construction Permits in Norway Dealing with Construction Permits data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 65 65 Procedures (number) 14 14 14 Time (days) 252 252 252 Cost (% of income per capita) 46.2 46.6 41.4 2. The following graphs illustrates the Dealing with Construction Permits indicators in Norway over the past 3 years: 11 3. Steps to Building a Warehouse in Norway It requires 14 procedures, takes 252 days, and costs 41.40 % GNI per capita to build a warehouse in Norway. List of Procedures: 1. Advance Conference with the Municipal Building 10. Request power connection Authorities 11. Receive electricity inspection 2. Obtain the Consent of Health Authorities 12. Obtain electricity connection 3. Obtain the Approval of Environmental Authorities 13. Obtain water and sewage connection 4. Obtain the Approval of Road Authorities 14. Obtain telephone connection 5. Obtain approval from the water company prior to building 6. Obtain approval from the sewage company prior to building 7. Obtain the Frame Permit (First Step of the Building Permit) 8. Obtain the Start-Up Permit and Present a Control Registration Form 9. Obtain an Approval from the Municipal Building Authorities upon completion of the project 12 More detail is included in the appendix. 4. Benchmarking Dealing with Construction Permits Regulations: Norway is ranked 65 overall for Dealing with Construction Permits. Ranking of Norway in Dealing with Construction Permits - Compared to good practice and selected economies: 13 The following table shows Dealing with Construction Permits data for Norway compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) income per Economies capita) Denmark 6 Qatar 0.6 Singapore 25 Selected Economy Norway 14 252 41.4 Comparator Economies Denmark 6 69 58.7 Finland 18 38 119.7 France 13 137 22.9 Germany 12 100 60.2 Iceland 18 75 22.2 14 Economies worldwide have established a system of laws and institutions intended to protect workers and guarantee a minimum standard of living for its population. This system generally encompasses four bodies of law: employment, industrial relations, social security and occupational health and safety laws. Employment regulations are needed to allow efficient contracting between employers and workers and to protect workers from discriminatory or unfair treatment by employers. Doing Business measures flexibility in the regulation of hiring, working hours and dismissal in a manner consistent with the conventions of the International Labour Organization (ILO). An economy can have the most flexible labor regulations as measured by Doing Business while ratifying and complying with all conventions directly relevant to the factors measured by Doing Business and with the ILO core labor standards. No economy can achieve a better score by failing to comply with these conventions. Governments all over the world face the challenge of finding the right balance between worker protection and labor market flexibility. But in developing countries especially, regulators often err to one extreme, pushing employers and workers into the informal sector. Analysis across economies shows that while employment regulation generally increases the tenure and wages of incumbent workers, overly rigid regulations may have undesirable side effects. These include less job creation, smaller company size, less investment in research and develop ment, and longer spells of unemployment and thus the obsolescence of skills, all of which may reduce productivity growth. Methodology Two measures are presented: a rigidity of employment index and a redundancy cost measure. The rigidity of employment in dex is the average of three sub-indices: difficulty of hiring, rigidity of hours and difficulty of redundancy. Each index takes values between 0 and 100, with higher values indicating more rigid regulation. The difficulty of hiring index measures the flexi bility of contracts and the ratio of the minimum wage to the value added per worker. The rigidity of hours index covers restrictions on weekend and night work, requirements relating to working time and the workweek taking into account legal provisions that refer specifically to small to medium-size companies in the manufacturing industry in which continuous operation is economically necessary, as well as mandated days of annual leave with pay. The difficulty of redundancy index covers workers' legal protec tions against dismissal, including the grounds permitted for dismissal and procedures for dismissal (individual and collective): notification and approval requirements, retraining or reassignment obligations and priority rules for dismissals and reemployme nt. The Redundancy cost indicator measures the cost of advance notice requirements, severance payments and penalties due when terminating a redundant worker, expressed in weeks of salary. Survey Case Study The business: is a limited liability company o perating in the manufacturing sector is located in the largest business city is 100% domestically owned has 60 employees The company is also assumed to be subject to collective bargaining agreements in economies where such agreements cover more than half the manufacturing sector and apply even to firms not party to them. 15 1. Historical data: Employing Workers in Norway Employing Workers data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 111 114 Redundancy costs (weeks of salary) 13 13 13 Rigidity of employment index (0-100) 44 44 44 2. The following graphs illustrates the Employing Workers indicators in Norway over the past 3 years: 16 3. Benchmarking Employing Workers Regulations: Norway is ranked 114 overall for Employing Workers. Ranking of Norway in Employing Workers - Compared to good practice and selected economies: 17 The following table shows Employing Workers data for Norway compared to good practice and comparator economies: Good Practice Rigidity of Redundancy employment costs (weeks Economies index (0-100) of salary) Hong Kong, China* 0 New Zealand* 0 Selected Economy Norway 44 13 Comparator Economies Denmark 7 0 Finland 41 26 France 52 32 Germany 42 69 Iceland 21 13 * The following economies are also good practice economies for : Rigidity of employment index (0-100): Australia, Brunei Darussalam, Kuwait, Marshall Islands, Singapore, St. Lucia, Uganda, United States Redundancy costs (weeks of salary): Denmark, Iraq, Marshall Islands, Micronesia, Fed. Sts., Palau, Puerto Rico, Tonga, United States 18 Formal property titles help promote the transfer of land, encourage investment and give entrepreneurs access to formal credit markets. But a large share of property in developing economies is not formally registered. Informal titles cannot be used as secur ity in obtaining loans, which limits financing opportunities for businesses. Many governments have recognized this and started extensive property titling programs. But bringing assets into the formal sector is only part of the story. The more difficult and costly it is to formally transfer property, the greater the chances that formalized titles will quickly become informal again. Eliminating unnecessary obstacles to registering and transferring property is therefore important for economic development. Efficient property registration reduces transaction costs and helps to formalize property titles. Simple procedures to register property are also associated with greater perceived security of property rights and less corruption. That s, benefits all entrepreneur especially women, the young and the poor. The rich have few problems protecting their property rights. They can afford to invest in security systems and other measures to defend their property. But small entrepreneurs cannot. Reform can change this. Methodology Doing Business records the full sequence of procedures necessary for a business (buyer) to purchase a property from another business (seller) and to transfer the property title to the buyer's name. The property of land and building will be tran sferred in its entirety. The transaction is considered complete when the buyer can use the property as collateral for a bank loan. Local property lawyers and officials in property registries provide information on required procedures as well as the time and cost to complete each one. For most economies the data are based on responses from both. Based on the responses, three indicators are constructed: number of procedures to register property time to register property (in calendar days) official costs to register property (as a percentage of the property value) Survey Case Study The buyer and seller: are limited liability companies are private nationals (no foreign ownership) are located in periurban area of the largest business city conduct general commercial activities The property: consists of land and a 2 -story building (warehouse) is located in the periurban commercial zone of the largest business city The land area is 557.4 m 2 (6,000 square feet). The warehouse has a total area of 929 m2 (10,000 square feet). has a value equal to 50 times income per capita The seller company owned the property for the last 10 years. is registered in the land registry and/or cadastre and is free of all disputes . 19 1. Historical data: Registering Property in Norway Registering Property data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 10 8 Procedures (number) 1 1 1 Time (days) 3 3 3 Cost (% of property value) 2.5 2.5 2.5 2. The following graphs illustrates the Registering Property indicators in Norway over the past 3 years: 20 3. Steps to Registering Property in Norway It requires 1 procedures, takes 3 days, and costs 2.51 % of property value to register the property in Norway. List of Procedures: 1. Submit an application for registration of transfer at the Land Registry More detail is included in the appendix. 21 4. Benchmarking Registering Property Regulations: Norway is ranked 8 overall for Registering Property. Ranking of Norway in Registering Property - Compared to good practice and selected economies: 22 The following table shows Registering Property data for Norway 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 Norway 1 3 2.5 Comparator Economies Denmark 6 42 0.6 Finland 3 14 4.1 France 8 98 6.1 Germany 4 40 5.2 Iceland 3 4 2.4 * The following economies are also good practice economies for : Procedures (number): United Arab Emirates Time (days): Saudi Arabia, Thailand, United Arab Emirates 23 Firms consistently rate access to credit as among the greatest barriers to their operation and growth. Doing Business constructs two sets of indicators of how well credit markets function: one on credit registries and the other on legal rights of borrowers and lenders. Credit registries, institutions that collect and distribute credit information on borrowers, can greatly expand access to credit. By sharing credit information, they help lenders assess risk and allocate credit more efficiently. They also free entrepreneurs from having to rely on personal connections alone when trying to obtain credit. Methodology Credit information: three indicators are constructed: depth of credit information index, which measures the extent to which the rules of a credit information system facilitate lending based on the scope of information distributed, the ease of access to information and the quality of information public registry coverage, which reports the number of individuals and firms covered by a public credit re gistry as a percentage of the adult population private bureau coverage, which reports the number of individuals and firms, covered by a private credit bureau as a percentage of the adult population Legal Rights: the strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders. Ten points are analyzed: Can a business use movable assets as collateral while keeping possession of the assets, and can any financial institution accept such assets as collateral? Does the law allow a business to grant a non -possessory security right in a single category of revolving movable assets, without requiring a specific description of the secured assets? Does the law allow a business to grant a non pos sessory security right in substantially all of its assets, without requiring a specific description of the secured assets? Can a security right extend to future or after -acquired assets and extend automatically to the products, proceeds or replacements of the original assets? Is general description of debts and obligations permitted in collateral agreements and in registration documents, so that all types of obligations and debts can be secured by stating a maximum rather than a specific amount between the parties? Is a collateral registry in operation that is unified geographically and by asset type as well as being indexed by the name of the grantor of a security right? Are secured creditors paid first when a debtor defaults outside an insolvency procedure or when a business is liquidated? Are secured creditors subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure? Are parties allowed to agree in a collateral agreement that the lender may enforce its security right out of court? Legal Rights Survey Case Study The Debtor: is a Private Limited Liability Company has its headquarters and only base of operations in the largest business city obtains a loan from a local bank (the Cred itor) for an amount up to 10 times income (GNI) per capita Both debtor and creditor are 100% domestically owned. 24 1. Historical data: Getting Credit in Norway Getting Credit data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 41 43 Strength of legal rights index (0-10) 7 7 7 Depth of credit information index (0-6) 4 4 4 Private bureau coverage (% of adults) 0.0 100.0 100.0 Public registry coverage (% of adults) 100.0 0.0 0.0 2. The following graphs illustrates the Getting Credit indicators in Norway over the past 3 years: 25 3. Benchmarking Getting Credit Regulations: Norway is ranked 43 overall for Getting Credit. Ranking of Norway in Getting Credit - Compared to good practice and selected economies: 26 The following table shows Getting Credit data for Norway 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 81.3 Singapore* 10 United Kingdom 6 Selected Economy Norway 7 4 0.0 100.0 Comparator Economies Denmark 9 4 0.0 5.2 Finland 7 5 0.0 14.7 France 7 4 32.5 0.0 Germany 7 6 0.8 98.3 Iceland 7 5 0.0 100.0 * 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. 27 Companies grow by raising capital, either through a bank loan or by attracting equity investors. Selling shares allows companies to expand without the need to provide collateral and repay bank loans. However, investors worry about their money, and look for laws that protect them. A study finds that the presence of legal and regulatory protections for investors explains up to 73% of the decision to invest. In contrast, company characteristics explain only between 4% and 22%*. Good protections for minority sh areholders are associated with larger and more active stock markets. Thus both governments and businesses have an interest in reforms strengthening investor protections. Methodology To document some of the protections investors have, Doing Business mea sures how economies regulate a standard case of self- dealing, use of corporate assets for personal gain. Three indices of investor protection are constructed based on the answers to these and other questions. All indices range from 0 to 10, with higher values indicating more protections or greater disclosure. The three indices are: The extent of disclosure index covers approval procedures, requirements for immediate disclosure to the public and shareholders of proposed transactions, requirements for disclosure in periodic filings and reports and the availability of external review of transactions before they take place. The extent of director liability index covers the ability of investors to hold Mr. James and the board of directors liable for damages, the ability to rescind the transaction, the availability of fines and jail time associated with self -dealing, the availability of direct or derivative suits and the ability to require Mr. James to pay back his personal profits from the transaction. The ease of shareholder suits index covers the availability of documents that can be used during trial, the ability of the investor to examine the defendant and other witnesses, shareholders' access to internal documents of the company, the appointment of an inspect or to investigate the transaction and the standard of proof applicable to a civil suit against the directors. These three indices are averaged to create the strength of investor protection index. Survey case study Mr. James, a director and the majority shareholder of a public company, proposes that the company purchase used trucks from another company he owns. The price is higher than the going price for used trucks. The transaction goes forward. All required approvals are obtained, and all required disclosures made, though the transaction is prejudicial to the purchasing company. Shareholders sue the interested parties and the members of the board of directors. Several questions arise: Who approves the transaction? What information must be disclosed ? What company documents can investors access? What do minority shareholders have to prove to get the transaction stopped or to receive compensation from Mr. James? *Doidge, Kardyi and Stulz (2007) 28 1. Historical data: Protecting Investors in Norway Protecting Investors data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 19 20 Strength of investor protection index (0-10) 6.7 6.7 6.7 2. The following graph illustrates the Protecting Investors index in Norway compared to best practice and selected Economies: 9.7 6.7 6.3 5.7 5.3 5.3 5.0 k d ay ar y nd ce d an an an m w an a nl or en m al el Fi Fr N Ic Ze er D G ew N Note: The higher the score, the greater the investor protection. 29 3. Benchmarking Protecting Investors Regulations: Norway is ranked 20 overall for Protecting Investors. Ranking of Norway in Protecting Investors - Compared to good practice and selected economies: 30 The following table shows Protecting Investors data for Norway compared to good practice and comparator economies: Good Practice Strength of investor Economies protection index (0-10) New Zealand 9.7 Selected Economy Norway 6.7 Comparator Economies Denmark 6.3 Finland 5.7 France 5.3 Germany 5.0 Iceland 5.3 31 Taxes are essential. Without them there would be no money to provide public amenities, infrastructure and services which are crucial for a properly functioning economy. But particularly for small and medium size companies, they may opt out and choose to op erate in the informal sector. One way to enhance tax compliance is to ease and simplify the process of paying taxes for such businesses. Methodology The Doing Business tax survey records the effective tax that a small and medium company must pay and the administrative costs of doing so. Three indicators are constructed: number of tax payments, which takes into account the method of payment, the frequency of payments and the number of agencies involved in our standardized case study. time, which measures the number of hours per year necessary to prepare and file tax returns and to pay the corporate income tax, value added tax, sales tax or goods and service tax and labor taxes and mandatory contributions. total tax rate, which measures the amount of taxes and mandatory contributions payable by the company during the second year of operation. This amount, expressed as a percentage of commercial profit, is the sum of all the different taxes payable after accounting for various deductions and exemptions. Survey case study TaxpayerCo is a medium-size business that started operations last year. Doing Business asks tax practitioners in 183 economies to review TaxpayerCo's financial statements and a standard list of transactions that the company completed during the year. Respondents are asked how much in taxes and mandatory contributions the business must pay and what the process is for doing so. The business starts from the same financial position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded. Taxes and mandatory contributions are measured at all levels of government and include corporate income tax, turnover tax, all labor taxes and contributions paid by the company (including mandatory contrib utions paid to private pension or insurance funds), property tax, property transfer tax, dividend tax, capital gains tax, financial transactions tax, vehicle tax, sales tax and other small taxes (such as fuel tax, stamp duty and local taxes). A range of standard deductions and exemptions are also recorded. 32 1. Historical data: Paying Taxes in Norway Paying Taxes data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 17 17 Total tax rate (% profit) 42.0 41.6 41.6 Payments (number per year) 4 4 4 Time (hours per year) 87 87 87 2. The following graphs illustrates the Paying Taxes indicators in Norway over the past 3 years: 33 3. Benchmarking Paying Taxes Regulations: Norway is ranked 17 overall for Paying Taxes. Ranking of Norway in Paying Taxes - Compared to good practice and selected economies: 34 The following table shows Paying Taxes data for Norway compared to good practice and comparator economies: Good Practice Payments Time (hours Total tax rate (number per per year) (% profit) Economies year) Maldives* 1 0 Timor-Leste 0.2 Selected Economy Norway 4 87 41.6 Comparator Economies Denmark 9 135 29.2 Finland 8 243 47.7 France 7 132 65.8 Germany 16 196 44.9 Iceland 31 140 25.0 * The following economies are also good practice economies for : Payments (number per year): Qatar 35 The benefits of trade are well documented; as are the obstacles to trade. Tariffs, quotas and distance from large markets greatly increase the cost of goods or prevent trading altogether. But with bigger ships and faster planes, the world is shrinking. Glo bal and regional trade agreements have reduced trade barriers. Yet Africa's share of global trade is smaller today than it was 25 years ago. So is the Middle East's, excluding oil exports. Many entrepreneurs face numerous hurdles to exporting or importing goods, including delays at the border. They often give up. Others never try. In fact, the potential gains from trade facilitation may be greater than those arising from only tariff reductions. Methodology Doing Business compiles procedural requirements for trading a standard shipment of goods by ocean transport. Every procedure and the associated documents, time and cost, for importing and exporting the goods is recorded, starting with the contractual agreement between the two parties and ending with delivery of the goods. For importing the goods, the procedures measured range from the vessel's arrival at the port of entry to the shipment's delivery at the importer's warehouse. For exporting the goods, the procedures measured range from the packing of thegoods at the factory to their departure from the port of exit. Payment is by letter of credit and the time and cost for issuing or securing a letter of credit is taken into account. Documents recorded include port filing documents, customs declaration and clearance documents, as well as official documents exchanged between the parties to the transaction. Time is recorded in calendar days, from the beginning to the end of each procedure. Cost includes the fees levied on a 20 -foot container in U.S. dollars . All the fees associated with completing the procedures to export or import the goods are included, such as costs for documents, administrative fees for customs clearance and technical control, terminal handling charges and inland transport. The cost measure does not include tariffs or duties. Economies that have efficient customs, good transport networks and fewer document requirements, making compliance with export and import procedures faster and cheaper, are more competitive globally. That can lead to more exports; and exports are associated with faster growth and more jobs. Conversely, a need to file many documents is associated with more corruption in customs. Faced with long delays and frequent demands for bribes, many traders may avoid customs altogether. Instead, they smuggle goods across the border. This defeats the very purpose in having border control of trade to levy taxes and ensure high quality of goods. Survey case study To make the data comparable across countries, several assumptions about the business and the traded goods are used: The business is of medium size . The business employs 60 people . The business is located in the peri-urban area of the economy'slargest business city . The business is a private, limited liability company, dom estically owned, formally registered and operating under commercial laws and regulations of the economy. The traded goods are ordinary, legally manufactured products transported in a dry-cargo, 20-foot FCL (full container load) container. 36 1. Historical data: Trading Across Borders in Norway Trading Across Borders data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 7 9 Cost to export (US$ per container) 568 830 830 Cost to import (US$ per container) 488 729 729 Documents to export (number) 4 4 4 Documents to import (number) 4 4 4 Time to export (days) 7 7 7 Time to import (days) 7 7 7 2. The following graphs illustrates the Trading Across Borders indicators in Norway over the past 3 years: 37 3. Benchmarking Trading Across Borders Regulations: Norway is ranked 9 overall for Trading Across Borders. Ranking of Norway in Trading Across Borders - Compared to good practice and selected economies: 38 The following table shows Trading Across Borders data for Norway 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 3 439 Selected Economy Norway 4 7 830 4 7 729 Comparator Economies Denmark 4 5 744 3 5 744 Finland 4 8 540 5 8 620 France 2 9 1078 2 11 1248 Germany 4 7 872 5 7 937 Iceland 5 19 1532 5 14 1674 * The following economies are also good practice economies for : Time to export (days): Estonia 39 Where contract enforcement is efficient, businesses are more likely to engage with new borrowers or customers. Doing Business tracks the efficiency of the judicial system in resolving a commercial dispute, following the step -by- step evolution of a commercial sale dispute before local courts. The data is collected through study of the codes of civil procedure and other court regulations as well as through surveys completed by local litigation lawyers (and, in a quarter of the countries, by judges as well). Justice delayed is often justice denied. And in many economies only the rich can afford to go to court. For the rest, justice is out of reach. In the absence of efficient courts, firms undertake fewer investments or business transactions. And they prefer to involve only a small group of people who know each other from previous dealings. Methodology Rankings on enforcing contracts are based on 3 sub-indicators: number of procedures, which are defined as any interaction between the parties or between them and the judge or court officer. This includes steps to file the case, steps for trial and judgment and steps necessary to enforce the judgment. time, which counts the number of calendar days from the moment the Seller files the lawsuit in court until payme nt is received. This includes both the days on which actions take place and the waiting periods in between. cost, which is recorded as a percentage of the claim (assumed to be equivalent to 200% of income per capita). Three types of costs are recorded: court costs (including expert fees), enforcement costs (including costs for a public sale of Buyer's assets) and attorney fees. Survey case Study The dispute concerns a contract for the sale of goods between two businesses (the Seller and the Buyer). Both are located in the economy's largest business city. The Seller sells and delivers goods, worth 200% of the economy's income per capita, to the Buyer. The Buyer refuses to pay on the grounds that they were not of adequate quality. The Seller sues the Buyer to recover the amount under the sales agreement (200% of the economy's income per capita). The claim is filed before a court in the economy's largest business city with jurisdiction over commercial cases worth 200% of the income per capita and is disputed on the merits. Judgment is 100% in favor of the Seller and is not appealed. The Seller enforces the judgment and the money is successfully collected through a public sale of Buyer's assets. 40 1. Historical data: Enforcing Contracts in Norway Enforcing Contracts data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 6 4 Procedures (number) 33 33 33 Time (days) 310 310 280 Cost (% of claim) 9.9 9.9 9.9 2. The following graphs illustrates the Enforcing Contracts indicators in Norway over the past 3 years: 41 3. Benchmarking Enforcing Contracts Regulations: Norway is ranked 4 overall for Enforcing Contracts. Ranking of Norway in Enforcing Contracts - Compared to good practice and selected economies: 42 The following table shows Enforcing Contracts data for Norway 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 Norway 33 280 9.9 Comparator Economies Denmark 34 380 23.3 Finland 32 375 10.4 France 29 331 17.4 Germany 30 394 14.4 Iceland 26 417 6.2 43 The economic crises of the 1990s in emerging markets, from East Asia to Latin America, from Russia to Mexico, raised concerns about the design of bankruptcy systems and the ability of such systems to help reorganize viable companies and close down unviable ones. In countries where bankruptcy is inefficient, unviable businesses linger for years, keeping assets and human capital from being reallocated to more productive uses. Bottlenecks in bankruptcy cut into the amount claimants can recover. In countries w here bankruptcy laws are inefficient, this is a strong deterrent to investment. Access to credit shrinks, and nonperforming loans and financial risk grow because creditors cannot recover overdue loans. Conversely, efficient bankruptcy laws can encourage entrepreneurs. The freedom to fail, and to do so through an efficient process, puts people and capital to their most effective use. The result is more productive businesses and more jobs. The Doing Business indicators identify weaknesses in the bankruptcy l aw as well as the main procedural and administrative bottlenecks in the bankruptcy process. In many developing countries bankruptcy is so inefficient that creditors hardly ever use it. In countries such as these, reform would best focus on improving contra ct enforcement outside bankruptcy. Methodology Three measures are constructed from the survey responses: the time to go through the insolvency process, the cost to go through the process and the recovery rate, how much of the insolvency estate is recovered by stakeholders, taking into account the time, cost, depreciation of assets and the outcome of the insolvency proceeding. Survey case study The data on closing a business are developed using a standard s et of case assumptions to track a company going through the step -by- step procedures of the bankruptcy process. It is assumed that: the company is a domestically owned the company is a limited liability corporation operating a hotel in the country's largest business city the company has 201 employees, 1 main secured creditor and 50 unsecured creditors Assumptions are also made about the future cash flows. The case is designed so that the company has a higher value as a going concern, that is, the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. The data are derived from questionnaires answered by attorneys at private law firms. 44 1. Historical data: Closing Business in Norway Closing a Business data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 3 3 Time (years) 0.9 0.9 0.9 Cost (% of estate) 1 1 1 Recovery rate (cents on the dollar) 90.7 89.0 89.0 2. The following graphs illustrates the Closing Business indicators in Norway over the past 3 years: 45 3. Benchmarking Closing Business Regulations: Norway is ranked 3 overall for Closing a Business. Ranking of Norway in Closing Business - Compared to good practice and selected economies: 46 The following table shows Closing Business data for Norway 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 92.5 Singapore* 1 Selected Economy Norway 89.0 0.9 1 Comparator Economies Denmark 86.5 1.1 4 Finland 87.3 0.9 4 France 44.7 1.9 9 Germany 52.2 1.2 8 Iceland 76.6 1.0 4 * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 47 Number of reforms in Doing Business 2010 Dealing with Construction Trading Across Borders Positive Reform Registering Property Enforcing Contracts Employing Workers Protecting Investors Starting a Business Closing a Business Negative Reform Total Getting Credit Paying Taxes number Permits of Rank reforms Economy 1 Rwanda 7 2 Kyrgyz Republic 7 3 Macedonia, FYR 7 4 Belarus 6 5 United Arab Emirates 3 6 Moldova 3 7 Colombia 8 8 Tajikistan 5 9 Egypt, Arab Rep. 4 10 Liberia 3 Norway 1 Denmark Finland Iceland 1 France 2 Germany 2 Note: Economies are ranked on the number and impact of reforms, Doing Business selects the economies that reformed in 3 or more of the Doing Business topics. Second, it ranks these economies on the increase in rank in Ease of Doing Business from the previous year. The larger the improvement, the higher the ranking as a reformer. 48 Belarus Belarus eased the process for getting construction permits by simplifying approval processes. Restrictions relating to redundancy dismissals were eased by raising the threshold for prior notification requirements. Tax payments were made more convenient through increased use of electronic systems--reducing tax compliance times--while lower ecological and turnover tax rates and a reduction in the number of payments for property tax reduced the tax burden on businesses. Property registration continues to improve, with faster processing and elimination of the requirement for notarization. Business start-up was eased by simplifying registration formalities, abolishing the minimum capital requirement, limiting the role of notaries, and removing the need for a company seal approval. Implementation of a risk-based management system and improvement of border crossing operations reduced transit times for trade. Colombia Colombia passed several decrees continuing its efforts to regulate the profession of insolvency administrators. The government eased the construction permit process with a new construction decree that categorizes building projects based on risk and allows electronic verification for certain documents. Access to credit improved thanks to a new credit information law that guarantees the right of borrowers to inspect their own data and new rules that make it mandatory for credit providers to consult and share information with credit bureaus. The tax burden on businesses was eased with the introduction of electronic tax filing and payment, and some payments were reduced. An amendment to the Company Law strengthened investor protections by making it easier to sue directors in cases of prejudicial transactions between interested parties. Property registration was made easier by making it possible to obtain required certificates online and by making standard preliminary sale agreements available free of charge. Business start-up was made easier by creating a public-private health provider that enables faster affiliation of employees and through a tool that allows online pre-enrollment with the social security office. Implementation of an electronic declaration system has expedited customs clearance. Denmark In Denmark no major reform was recorded. Egypt, Arab Rep. The Arab Republic of Egypt, a former global leading reformer and a regional leading reformer in 2008/09, continued to make it easier to deal with construction permits by issuing executive articles for the 2008 construction law and eliminating most preapprovals for construction permits. Contract enforcement was expedited with the creation of commercial courts. Access to credit information has expanded with the addition of retailers to the database of the private credit bureau. Finally, company start-up was eased by the removal of the minimum capital requirement. Finland Finland made it easier to pay taxes by extending electronic filing to corporate income taxes and reduced the burden on business and the cost of employment by cutting labor taxes. France France improved the insolvency process by encouraging preinsolvency workouts and no longer requiring estimation of the value of assets by a public auctioneer. A fuller electronic connection between notaries and the land registry reduced the time to transfer property in France and made it easier to obtain encumbrance and ownership documents from the registry. Germany Germany's recent Act on the Implementation of Measures to Stabilize the Financial Market (Finanzmarktstabilisierungsgesetz) removes the requirement for potentially viable companies to file for immediate insolvency in cases of overindebtedness. The business start-up process was eased by reducing the minimum capital requirement to a value that is merely symbolic. Iceland Iceland eased the tax burden on companies by reducing the corporate income tax rate from 18 percent to 15 percent. 49 Kyrgyz Republic The Kyrgyz Republic eased the process for getting construction permits by streamlining the fee structure, introducing a risk-based system of approval and building control, allowing low-risk projects to conduct an internal building control process, and simplifying the process for obtaining utility connections. Requirements relating to redundancy dismissals and worker reassignment were eased. Access to credit was enhanced by making secured lending more flexible and allowing general descriptions of encumbered assets and of debts and obligations. In addition, amendments to the Civil Code provide for automatic extension of security rights to proceeds of the original assets. The tax burden on businesses was eased by reducing the rates for several taxes and the number of payments for several. Surveying and notarization requirements were made optional for property registration, and business start-up was eased by eliminating the minimum capital requirement, reducing the registration time, and abolishing various post-registration fees and the need to open a bank account before registration. The elimination of six previously required documents and the simplification of inspection procedures has sped up trading across borders. Liberia Liberia eased the process for getting construction permits by lowering the permit fee and cost of obtaining a power generator, abolishing the requirement to obtain a tax waiver certificate before submitting documents to obtain a building permit, and making fixed telephone connections more readily available for public use with the reopening of the national phone company. Business start-up was eased by removing the need to obtain an environmental impact assessment when forming a general trading company. The trade process was expedited by creating a one-stop shop bringing together various ministries and agencies, and streamlining the inspection regime. Macedonia, FYR The Former Yugoslav Republic of Macedonia has been reforming the construction permit process, shortening waiting times but raising fees. Worker hiring was made more flexible by allowing greater use of fixed-term contracts, easing restrictions on working hours, and making redundancy dismissals more flexible. The public credit bureau increased its coverage by introducing a better database that includes more information and by lowering the minimum loan threshold. Social security payments were classified in five groups, and social security contribution rates reduced. Investor protections were increased by regulating the approval of transactions between interested parties, increasing disclosure requirements in annual reports, and making it easier to sue directors in cases of prejudicial transactions between interested parties. Property registration was eased with the introduction of new time limits at the real estate cadastre--reducing the average time to register a title deed by eight days--and a non-encumbrance certificate can now be obtained from the real estate registry instead of through the court. Business start-up was simplified by integrating procedures at a one-stop shop. Moldova Moldova lowered the rates for social security contributions paid by employers. Property registration was simplified by eliminating the requirement for a cadastral sketch, reducing procedures from six to five and days from 48 to 5. Business start-up was eased by implementing an expedited company registration service. Norway Norway sped up contract enforcement with the introduction and monitoring of tighter deadlines. Rwanda Rwanda improved the process for dealing with distressed companies with a new law aimed at streamlining reorganization. Employing workers was made easier by abolishing the maximum duration for fixed-term contracts and allowing unlimited renewals of such contracts, as well as by allowing redundancy procedures to be more flexible, with consultation and notification of third parties no longer required. Getting credit was made easier with a new secured transactions act and insolvency act to make secured lending more flexible, allowing a wider range of assets to be used as collateral and a general description of debts and obligations. In addition, out of court enforcement of collateral has become available to secured creditors, who also now have top priority within bankruptcy. A new company law has strengthened investor protections by requiring greater corporate disclosure, director liability, and shareholder access to information. Property registration was simplified by decreasing the number of days required to transfer a property. Business start-up was eased by eliminating a notarization requirement; introducing standardized memorandums of association; enabling online publication; consolidating name checking, registration fee payment, tax registration, and company registration procedures; and shortening the time required to process completed applications. By implementing administrative changes--such as increased operating hours and enhanced cooperation at the border, along with the removal of some documentation requirements for importers and exporters--Rwanda has improved trading times. 50 Tajikistan Tajikistan amended its insolvency law, aiming to reduce statutory time limits and the costs of proceedings. Changes were introduced that simplified the construction permit process, reducing procedures and time. A new law on credit histories improves access to credit information by creating a private credit bureau. Investor protections were strengthened with amendments to the joint stock company law, increasing disclosure requirements for transactions involving conflicts of interest, allowing for greater director liability, and giving shareholders the chance to request that harmful related-party transactions be rescinded. The state duty for property transfer has quadrupled, raising the cost of registering property by 2.8 percent of a property's value. Business start-up was eased by reducing the minimum capital requirement and shortening the time to obtain a tax identification number. United Arab Emirates The United Arab Emirates shortened the time for delivering building permits by improving its online system for processing applications. Business start-up was eased by simplifying the documents needed for registration, abolishing the minimum capital requirement, and removing the requirement that proof of deposit of capital be shown for registration. Greater capacity at the container terminal, elimination of the terminal handling receipt as a required document, and an increase in trade finance products, have improved trade processes. 51 APPENDICES Starting a Business in Norway This table summarizes the procedures and costs associated with setting up a business in Norway. STANDARDIZED COMPANY Legal Form: Alksjeselskap (AS) - Private joint stock company Minimum Capital Requirement: City: Oslo Registration Requirements: No: Procedure Time to complete Cost to complete 1 Deposit initial capital 1 0 2 Have the balance sheet examined by a certified outside auditor 1 4000 3 Register with the Register of Business Enterprises and file for VAT 3 6000 registration. 4 * The employer enrolls in the mandatory workers' injury insurance 1 0 5 * Arrange for mandatory occupational pension plan for employees 3 0 * Takes place simultaneously with another procedure. 52 Procedure 1 Deposit initial capital Time to complete: 1 Cost to complete: 0 Comment: Procedure 2 Have the balance sheet examined by a certified outside auditor Time to complete: 1 Cost to complete: 4000 Comment: The auditor must issue three statements confirming (a) the opening balance; (b) the share deposit as being fully paid up, and (c) the company's acceptance of the auditor appointment. Statement fees are NOK 3,000­5,000. Procedure 3 Register with the Register of Business Enterprises and file for VAT registration. Time to complete: 3 Cost to complete: 6000 Comment: In January 2007 the Norwegian Company Registry launched an improved version of their Web-based registration. The old registration system was upgraded from a semielectronic system to a fully electronic one. In 2006, only the registration form (a standard form that always must be filed for registration purposes) could be filed over the Internet in an unsigned version, whereas the rest of the required documents, such as the memorandum and articles of association, the auditor statements, and the originally signed registration form, had to be sent by regular mail. The new version of the web-based filing system allows for electronic signature of the registration form and for the possibility to upload all attachments (copies of signed versions of the memorandum, auditor statements, and the rest) as Adobe Acrobat files. It will still possible to file all documents manually by regular mail. Some registration enquiries cannot be filed over the Internet (mergers, some cases of increase of share capital, and so on) and must be filed by mail. Registration also protects the firm name. VAT registration is required when the company's turnover has exceeded NOK 50,000. VAT cannot be charged on goods and other items before VAT registration is completed. However, in certain cases the company may register for VAT before starting business operations. The VAT registration form can be submitted at the same time as filing for company registration. Procedure 4 The employer enrolls in the mandatory workers' injury insurance Time to complete: 1 Cost to complete: 0 Comment: Procedure 5 Arrange for mandatory occupational pension plan for employees 53 Time to complete: 3 Cost to complete: 0 Comment: As of July 1, 2006, a new law was adopted requiring the employer to arrange for a mandatory occupational pension plan for its employees. The fees vary with the benefits and level of coverage in the pension plan. The minimum requirement is 2% of each employee's salary (within average levels of salaries). 54 Dealing with Construction Permits in Norway The table below summarizes the procedures, time, and costs to build a warehouse in Norway. BUILDING A WAREHOUSE Date as of: January 2009 Estimated Warehouse Value: City: Oslo Registration Requirements: No: Procedure Time to complete Cost to complete 1 Advance Conference with the Municipal Building Authorities 14 days no charge 2 Obtain the Consent of Health Authorities 10 days no charge 3 * Obtain the Approval of Environmental Authorities 10 days no charge 4 * Obtain the Approval of Road Authorities 10 days no charge 5 * Obtain approval from the water company prior to building 10 days no charge 6 * Obtain approval from the sewage company prior to building 10 days no charge 7 Obtain the Frame Permit (First Step of the Building Permit) 210 days NOK 72,800 8 * Obtain the Start-Up Permit and Present a Control Registration Form 21 days no charge 9 Obtain an Approval from the Municipal Building Authorities upon 10 days no charge completion of the project 10 Request power connection 1 day no charge 11 Receive electricity inspection 1 day no charge 12 Obtain electricity connection 4 days NOK 80,000 13 Obtain water and sewage connection 1 day NOK 67,910 14 Obtain telephone connection 1 day NOK 990 * Takes place simultaneously with another procedure. 55 Procedure 1 Advance Conference with the Municipal Building Authorities Time to complete: 14 days Cost to complete: no charge The advance conference is optional, but often necessary to clarify the prerequisites for the Comment: project, such as infrastructure, various laws and regulations, and coordination and the approvals from other authorities. The time to complete this procedure may vary. In Oslo, the normal waiting time is approximately 3 weeks. These conferences are not binding for the final result of the approval process. Procedure 2 Obtain the Consent of Health Authorities Time to complete: 10 days Cost to complete: no charge Generally, the building permit is not issued if the applicant has not obtained all necessary Comment: approvals. In such cases, the municipal building authority points out the missing approvals and orders the applicant to submit them before further progress can be made. Procedure 3 Obtain the Approval of Environmental Authorities Time to complete: 10 days Cost to complete: no charge Comment: Procedure 4 Obtain the Approval of Road Authorities Time to complete: 10 days Cost to complete: no charge Comment: Procedure 5 Obtain approval from the water company prior to building Time to complete: 10 days Cost to complete: no charge Approval from the electricity company is not necessary. Only an authorization for water Comment: and sewage is required. Procedure 6 Obtain approval from the sewage company prior to building Time to complete: 10 days Cost to complete: no charge 56 Comment: Procedure 7 Obtain the Frame Permit (First Step of the Building Permit) Time to complete: 210 days Cost to complete: NOK 72,800 The frame permit is the first step toward obtaining the building permit. It grants only the Comment: right to build the project as designed; it does not authorize construction. The permit ensures that the project meets all relevant regulations and is valid for 3 years. The application for a frame permit must contain all relevant information on the project, architectural drawings, and other requirements, according to the Planning and Building Act and other relevant regulations. The legal maximum time to complete this procedure is 84 days. In practice, obtaining the frame permit in Oslo currently takes about 7 months (the time estimated by the building authorities themselves). The reasons for the delayed executive work are: - High building activity. - A corresponding increase in building applications. - A shortage of manpower in the building authorities. The cost of obtaining a frame permit is calculated as follows: - For areas up to 200 sq. m., the total cost is NOK 20,000. - For areas exceeding 200 sq. m., the cost is NOK 4,800 per 100 sq. m. In the case considered here, the cost is 20,000 + (1,300 - 200) x 48 = NOK 72,800. Procedure 8 Obtain the Start-Up Permit and Present a Control Registration Form Time to complete: 21 days Cost to complete: no charge The start-up permit authorizes the start of construction activities. This permit contains the Comment: authorization (construction license) of the companies responsible for the coordination, design, construction, and monitoring of the project. The company must in this respect either present its qualifications to the municipal building authorities or present a license from the central register. The company must also present all the consents/approvals obtained through the previous procedures. The applicant should ensure that a construction oversight plan is drawn up. Such a plan should appear in the application or be submitted while the application for a start-up permit is being reviewed, at the latest. The construction may be monitored by means of documented self-inspections or by an independent enterprise. The developer, the applicant, the designer, and the contractor in charge must provide the information necessary to monitor the construction. The latter is normally executed through self-inspection. The legal maximum time to complete this stage is 84 days. Obtaining a start-up permit in Oslo currently takes 3 weeks. Procedure 9 Obtain an Approval from the Municipal Building Authorities upon completion of the project Time to complete: 10 days Cost to complete: no charge The company must obtain an approval from the municipal building authorities upon Comment: completion of the project. Procedure 10 Request power connection Time to complete: 1 day 57 Cost to complete: no charge BuildCo does not have to obtain the approval of the electricity company (Hafslund) Comment: before starting the construction (unlike for water and sewerage service). However, the electricity company will need to check the site to see if there is any need for transformers to be installed, and the like. Procedure 11 Receive electricity inspection Time to complete: 1 day Cost to complete: no charge Comment: Procedure 12 Obtain electricity connection Time to complete: 4 days Cost to complete: NOK 80,000 The different utility connections have all been approved during the application for the Comment: building permit. The company will therefore be connected to utilities once it requests them, and on the date agreed upon. Inspectors will inspect the installations if necessary and connect the warehouse to the electricity network. When the inspection is requested, processing the request may take up to 2 weeks. Procedure 13 Obtain water and sewage connection Time to complete: 1 day Cost to complete: NOK 67,910 The water and sewage authorities must be present when the connection is installed, and Comment: the applicant must send a request form determining the time for the connection. Such a request must be received by the authorities, at the latest, at 10 a.m. the day before the connection is to take place. The receipt for the paid connection fee must be attached to the request form where the connection time and place are determined For 2008, the City Parliament of Oslo has established the taxes to be paid at NOK 73.10 per sq.m. (929 sq.m.) The connection fee is a nonrecurrent one and covers the costs of building and maintaining the public pipelines (both water and sewage pipelines--that is, the water supply from purification plant to the consumer, and sewage transport from the consumer to waste water plant). A reduction is given when the land plot is larger than 3,000 square meters and utilization is less than 12.5% (not applicable in this case). Procedure 14 Obtain telephone connection Time to complete: 1 day Cost to complete: NOK 990 Due to market fluctuations the connection fee was increased in 2008 to NOK 990. Comment: 58 Employing Workers in Norway Employing workers indices are based on responses to survey questions. The table below shows these responses in Norway. Employing Workers Indicators (2009) Answer Score 61.1 Difficulty of hiring index (0-100) Are fixed-term contracts prohibited for permanent tasks? Yes 1 What is the maximum duration of fixed-term contracts (including renewals)? (in months) 48 0.5 What is the ratio of mandated minimum wage to the average value added per worker? 0.30 0.33 30.0 Difficulty of redundancy index (0-10) Is the termination of workers due to redundancy legally authorized? Yes 0 Must the employer notify a third party before terminating one redundant worker? No 0 Does the employer need the approval of a third party to terminate one redundant worker? No 0 Must the employer notify a third party before terminating a group of 9 redundant workers? No 0 Does the employer need the approval of a third party to terminate a group of 9 redundant No 0 workers? Is there a retraining or reassignment obligation before an employer can make a worker Yes 1 redundant? Are there priority rules applying to redundancies? Yes 1 Are there priority rules applying to re-employment? Yes 1 13.0 Redundancy costs (weeks of salary) What is the notice period for redundancy dismissal after 20 years of continuous 13.0 employment? (weeks of salary) What is the severance pay for redundancy dismissal after 20 years of employment? (weeks of 0.0 salary) What is the legally mandated penalty for redundancy dismissal? (weeks of salary) 0.0 43.7 Rigidity of employment index (0-100) 40.0 Rigidity of hours index (0-100) Can the workweek extend to 50 hours (including overtime) for 2 months per year to Yes 0 respond to a seasonal increase in production? 59 What is the maximum number of working days per week? 6 0 Are there restrictions on night work and do these apply when continuous operations are Yes 1.00 economically necessary? Are there restrictions on "weekly holiday" work and do these apply when continuous Yes 1.00 operations are economically necessary? What is the paid annual vacation (in working days) for an employee with 20 years of 21 0 service? Note: The first three indices measure how difficult it is to hire a new worker, how rigid the regulations are on working hours, and how difficult it is to dismiss a redundant worker. Each index assigns values between 0 and 100, with higher values representing more rigid regulations. The overall Rigidity of Employment Index is an average of the three indices. 60 Registering Property in Norway This topic examines the steps, time, and cost involved in registering property in Norway. STANDARDIZED PROPERTY Property Value: 26,774,007.72 City: Oslo Registration Requirements: No: Procedure Time to complete Cost to complete 1 Submit an application for registration of transfer at the 3 days NOK 1,548 (registration Land Registry fee) + 2.5% of the value of the property (stamp duty) 61 Procedure 1 Submit an application for registration of transfer at the Land Registry Time to complete: 3 days Cost to complete: NOK 1,548 (registration fee) + 2.5% of the value of the property (stamp duty) Comment: There is no need for a lawyer or notary to be involved in the process. The application is a standard form and may be acquired in book stores and the internet. The fee to receive the title is NOK 1,548 and the stamp duty tax is 2.5% of the value of the property. If the transaction is financed by debt, the buyer has to pay a public fee to register a mortgage bond, equal to NOK 1,935. Upon refinancing an existing mortgage loan within the same loan frame, the fee to register a new mortgage deed or transporting the old mortgage deed to the new one, has been reduced to NOK 215. As of April 1st, 2005 the registration fee and the transfer tax is to be paid after the registration, not before, and can be paid online. Until 2004 the registration process had been performed by the local courts under the supervision of a judge (however the work is mainly executed by clerks without the involvement of any judge). Between March 2004 and 2007 the registration responsibility was being transferred from 87 public courts to the Norwegian Mapping and Cadastre Authority, which will maintain one single registration office for the entire country. The registration process was formally transferred to the Norwegian Mapping and Cadastre Authority on October 20, 2007. Currently all documents are received by post, but the reform shall facilitate the use of electronic documents. Due to the Centralization of the registry in Oslo, the time needed to complete the only registration procedure (the registration process, in other words) has increased temporarily. The current process goes as follows: First, the required documents will be received and registered by the registry in the daily book. Second, the relevant data will be entered into database. Third, staff members will verify the data. Fourth, a deed stamped by the Register is sent by ordinary mail to the buyer. An invoice is also sent for the registration fees and stamp duty, and the payment can be made online. 62 Getting Credit in Norway The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in Norway. Getting Credit Indicators (2009) Indicator score Private credit Public credit Private bureau coverage (% of adults) 4 bureau registry Are data on both firms and individuals distributed? Yes No 1 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? Yes No 1 Is data on all loans below 1% of income per capita distributed? Yes No 1 Is it guaranteed by law that borrowers can inspect their data in the Yes No 1 largest credit registry? Coverage 100.0 0.0 Number of individuals .. 0 Number of firms .. 0 Strength of legal rights index (0-10) 7 Can any business use movable assets as collateral while keeping possession of the assets; and any financial Yes institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of revolving movable Yes assets, without requiring a specific description of the secured assets ? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without No requiring a specific description of the secured assets ? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, No proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations Yes 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 Yes grantor's name of a security right ? Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? Yes Do secured creditors have absolute priority to their collateral in bankruptcy procedures? Yes 63 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? Yes 64 Protecting Investors in Norway The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are calculated in Norway. Protecting Investors Data (2009) Indicator Extent of disclosure index (0-10) 7 2 What corporate body provides legally sufficient approval for the transaction? (0-3; see notes) 2 Immediate disclosure to the public and/or shareholders (0-2; see notes) 1 Disclosures in published periodic filings (0-2; see notes) 1 Disclosures by Mr. James to board of directors (0-2; see notes) 1 Requirement that an external body review the transaction before it takes place (0=no, 1=yes) Extent of director liability index (0-10) 6 2 Shareholder plaintiff's ability to hold Mr. James liable for damage the Buyer-Seller transaction causes to the company. (0-2; see notes) 1 Shareholder plaintiff's ability to hold the approving body (the CEO or board of directors) liable for damage to the company. (0-2; see notes) 0 Whether a court can void the transaction upon a successful claim by a shareholder plaintiff (0-2; see notes) 1 Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff (0=no, 1=yes) 0 Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff (0=no, 1=yes) 1 Whether fines and imprisonment can be applied against Mr. James (0=no, 1=yes) 1 Shareholder plaintiff's ability to sue directly or derivatively for damage the transaction causes to the company (0-1; see notes) Ease of shareholder suits index (0-10) 7 3 Documents available to the plaintiff from the defendant and witnesses during trial (0-4; see notes) 2 Ability of plaintiffs to directly question the defendant and witnesses during trial (0-2; see notes) 0 Plaintiff can request categories of documents from the defendant without identifying specific ones (0=no, 1=yes) 1 Shareholders owning 10% or less of Buyer's shares can request an inspector investigate the transaction (0=no, 1=yes) 65 1 Level of proof required for civil suits is lower than that for criminal cases (0=no, 1=yes) 0 Shareholders owning 10% or less of Buyer's shares can inspect transaction documents before filing suit (0=no, 1=yes) Strength of investor protection index (0-10) 6.7 Notes: Extent of Disclosure Index What corporate body provides legally sufficient approval for the transaction? 0=CEO or managing director alone; 1=shareholders or board of directors vote and Mr. James can vote; 2=board of directors votes and Mr. James cannot vote; 3 = shareholders vote and Mr. James cannot vote Immediate disclosure to the public and/or shareholders 0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest Disclosures in published periodic filings 0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest Disclosures by Mr. James to board of directors 0=none; 1=existence of a conflict without any specifics; 2= full disclosure of all material facts Director Liability Index Shareholder plaintiff's ability to hold Mr. James liable for damage the Buyer-Seller transaction causes to the company 0= Mr. James is not liable or liable only if he acted fraudulently or in bad faith; 1= Mr. James is liable if he influenced the approval or was negligent; 2= Mr. James is liable if the transaction was unfair, oppressive or prejudicial to minority shareholders Shareholder plaintiff's ability to hold the approving body (the CEO or board of directors) liable for for damage to the company 0=members of the approving body are either not liable or liable only if they acted fraudulently or in bad faith; 1=liable for negligence in the approval of the transaction; 2=liable if the transaction is unfair, oppressive, or prejudicial to minority shareholders Whether a court can void the transaction upon a successful claim by a shareholder plaintiff 0=rescission is unavailable or available only in case of Seller's fraud or bad faith; 1=available when the transaction is oppressive or prejudicial to minority shareholders; 2=available when the transaction is unfair or entails a conflict of interest Shareholder plaintiffs' ability to sue directly or derivatively for damage the transaction causes to the company 0=not available; 1=direct or derivative suit available for shareholders holding 10% of share capital or less Shareholder Suits Index Documents available to the plaintiff from the defendant and witnesses during trail Score 1 each for (1) information that the defendant has indicated he intends to rely on for his defense; (2) information that directly proves specific facts in the plaintiff's claim; (3) any information that is relevant to the subject matter of the claim; and (4) any information that may lead to the discovery of relevant information. Ability of plaintiffs to directly question the defendant and witnesses during trial 0=no; 1=yes, with prior approval by the court of the questions posed; 2=yes, without prior approval 66 Paying Taxes in Norway The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year in Norway, 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 Value added tax (VAT) 1 online 48 25.00% value added filing fuel tax 1 included in 1.26 fuel price Social security 1 online 15 14.1% gross salaries 15.91 contributions filing Corporate income tax 1 online 24 28.0% taxable 24.40 filing profits Totals 4 87 41.6 Notes: a) data not collected b) VAT is not included in the total tax rate because it is a tax levied on consumers c) very small amount d) included in other taxes e) Withheld tax f) electronic filling available g) paid jointly with another tax Name of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. When there is more than one statutory tax rate, the one applicable to TaxpayerCo is reported. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. 67 Trading Across Borders in Norway These tables list the procedures necessary to import and exports a standardized cargo of goods in Norway. The documents required to export and import the goods are also shown. Nature of Export Procedures (2009) Duration (days) US$ Cost Documents preparation 4 225 Customs clearance and technical control 1 125 Ports and terminal handling 1 130 Inland transportation and handling 1 350 Totals 7 830 Nature of Import Procedures (2009) Duration (days) US$ Cost Documents preparation 4 150 Customs clearance and technical control 1 42 Ports and terminal handling 1 187 Inland transportation and handling 1 350 Totals 7 729 Export Bill of lading Commercial invoice Customs import declaration Packing list Import Bill of lading Commercial invoice Customs import declaration Packing list 68 Enforcing Contracts in Norway This topic looks at the efficiency of contract enforcement in Norway. Nature of Procedure (2009) Indicator Procedures (number) 33 Time (days) 280 Filing and service 40.0 Trial and judgment 195.0 Enforcement of judgment 45.0 Cost (% of claim)* 9.90 Attorney cost (% of claim) 8.0 Court cost (% of claim) 1.3 Enforcement Cost (% of claim) 0.6 Court information: Oslo District Court ("Oslo Tingrett") * Claim assumed to be equivalent to 200% of income per capita. 69 70 71