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Copies of Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Busi- ness in 2005: Removing Obstacles to Growth, and Doing Business in 2004: Understanding Regulation may be purchased at www.doingbusiness.org. Contents Doing Business 2007: Organization of Eastern Caribbean States Overview 1 is a regional report drawing on the data of the global Doing Business project and database, as well as the findings of Doing Starting a business 4 Business 2007: How to Reform, an annual report published by the World Bank and the International Finance Corporation. Dealing with licenses 7 Doing Business analyzes government regulations that Employing workers 10 enhance business activity and those that constrain it in 175 countries, including the six independent member states of the Registering property 12 Organization of Eastern Caribbean States (OECS): Antigua Getting credit 15 and Barbuda, the Commonwealth of Dominica, Grenada, the Protecting investors 18 Federation of St. Christopher (St. Kitts) and Nevis, St. Lucia, and St. Vincent and the Grenadines. Quantitative indicators Paying taxes 20 on business regulations and their enforcement can now be Trading across borders 22 compared with 169 economies around the world, including 9 other Caribbean economies and 34 small states. Enforcing contracts 25 Regulations affecting 10 areas of everyday business are Closing a business 27 measured: starting a business, dealing with licenses, employ- ing workers, registering property, getting credit, protecting Data notes 29 investors, paying taxes, trading across borders, enforcing contracts and closing a business. The indicators are used to Doing business indicators analyze economic outcomes and identify what reforms have Indicator table 43 worked, where and why. Comparisons with other countries in Country tables 44 this report are based on the indicators in Doing Business 2007: Case studies How to reform. Other areas important to business—such as a Starting a business 47 country’s proximity to large markets, quality of infrastructure Dealing with licenses 50 services (other than services related to trading across borders), Registering property 54 the security of property from theft and looting, the transpar- ency of government procurement, macroeconomic conditions Acknowledgments 58 or the underlying strength of institutions—are not studied directly by Doing Business. This regional report is the result of requests by the governments of the 6 countries to the Foreign Investment Advisory Service (FIAS), which is a multidonor service of the World Bank and the International Finance Corporation. It was produced with support from the United States Agency for International Development (USAID). 1 Overview If you were opening a new business in Grenada, the start- sample rank in the top half on the ease of doing business. up procedures would take 52 days. In Micronesia, it takes Small states perform well on the ease of dealing with only 16 days. If your company were to comply with all tax licenses, employing workers and paying taxes. But few requirements in Antigua and Barbuda, it would take 44 small states make it easy to register property, get credit separate payments and 528 administrative hours per year. or enforce contracts. The same firm would make only 7 payments in Mauri- Last year, 13 small states introduced 18 reforms to tius, requiring 158 hours of preparation time. And if you make it easier to do business, while 5 had negative re- needed to take a customer to court in Dominica, resolving forms. Only 2 of the positive reforms were in OECS coun- the dispute would take an average of 681 days. In Singa- tries, both in Antigua and Barbuda: improved regulations pore the same case could be resolved in just 120 days. for registering a new business and reduced tax rates (table Starting a business is a leap of faith even in the 1.2). More reform in OECS countries is needed. best of circumstances. Governments should encourage Reform can ease the bureaucratic burden on all the daring. And many do. Globally, 213 reforms in 112 businesses: small and large, domestic and foreign, rural economies were introduced between January 2005 and and urban. By providing easy start-up requirements and April 2006. The reforms led to simpler business regula- strong property rights, any business will have the op- tions, stronger property rights, lighter tax burdens and portunity to thrive. Better performance on the indicators easier tax administration, improved access to credit FIGURE 1.1 and lower costs of cross-border trade for entrepreneurs Where is it easy to do business in the OECS, and where not? worldwide. OECS ranking 1 SINGAPORE Global ranking Doing Business measures the ways in which govern- 1 St. Lucia ment regulations enhance business activity or restrain it. 2 Antigua and 27 33 The results for the OECS1 countries are presented here Barbuda 44 3 St. Vincent and (figure 1.1). The OECS countries perform well on the the Grenadines 72, 73 ease of starting a business, dealing with licenses and the 4 Dominica 85 strength of investor protections. OECS countries fall be- 5 Grenada hind on the ease of getting credit, enforcing contracts and 6 St. Kitts and Nevis closing a business. Results are mixed for trading across borders, registering property and paying taxes (table 1.1). Globally, small states2 perform slightly better than 175 CONGO, DEM. REP. larger economies on the Doing Business rankings. Two- Note: Rankings on the ease of doing business are the average of the country rankings on the 10 topics covered in Doing Business 2007. The rankings for all 175 economies are thirds of the 40 small states included in the global benchmarked to April 2006. Source: Doing Business database (www.doingbusiness.org). 2 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES TABLE 1.1 How do the OECS countries rank globally across the Doing Business topics? Starting a Dealing with Employing Registering Getting Protecting Paying Trading across Enforcing Closing a business licenses workers property credit investors taxes borders contracts business Antigua and Barbuda 22 15 40 71 101 19 145 47 47 54 Dominica 24 34 50 78 101 19 20 97 159 151 Grenada 50 12 34 145 83 19 45 84 143 151 St. Kitts and Nevis 105 7 35 136 117 19 116 37 135 151 St. Lucia 43 10 29 51 101 19 9 45 160 39 St. Vincent and the Grenadines 29 1 48 101 83 19 32 48 125 151 OECS average 46 13 39 97 98 19 61 60 128 116 Note: Rankings for each indicator set are the average of the country rankings across the 175 economies measured by Doing Business on each group of sub-indicators. See the Data notes for details. Source: Doing Business database (www.doingbusiness.org). measured by Doing Business is associated with greater adopting the best regulations in the world rather than economic growth,3 lower unemployment and less infor- through competing against each other. With harmo- mality.4 Yet good regulatory performance is not a func- nized regulations, investors have less opportunity to play tion of wealth: poorer economies can—and frequently individual countries against each other. Third, coordi- do—perform better than richer economies on the Doing nating the reform effort can reduce the costs of adopting Business indicators. technologies to improve the efficiency of government. Some laws affecting businesses have already been Reforming business regulations in OECS countries harmonized. The OECS countries share similar compa- nies acts that guide business start-up and the legal rights The OECS member states are on a path to greater of borrowers and lenders, as well as bankruptcy proce- economic integration—among themselves and in the dures. Contract enforcement is subject to common civil context of the Caribbean Single Market Economy. As procedure rules. And a common trade policy is being de- they integrate economically, reform is needed to further veloped in the context of the larger Caribbean Commu- harmonize regulations across member countries. nity (CARICOM). Yet in the remaining areas of business This has several advantages. First, economic har- regulation covered by this report—construction licens- monization will make it easier for businesses to expand ing, labor, taxes and property registration—the OECS across the sub-region. Currently, companies willing to member countries continue to use different legislation. operate in several OECS countries must deal with differ- Differences also arise in how harmonized legislation ent procedures and requirements in each of them, ham- is implemented in each jurisdiction. Despite the similar pering their entry and growth in the different markets. companies acts, starting a business in St. Vincent and the Second, countries can focus on attracting investors by Grenadines takes 12 days while in St. Kitts and Nevis an entrepreneur needs 47 days to complete all the require- TABLE 1.2 ments. Similarly, a business seeking to resolve a dispute Thirteen small states reformed in 2005/06 with its customer has to follow the same set of procedures Indicator Positive reformers (negative reformers) in all jurisdictions, but doing so takes an average of 297 Starting a business Antigua and Barbuda, Lesotho, Micronesia days in Antigua and Barbuda and 635 in St. Lucia. (Palau, Swaziland) Dealing with licenses (Timor-Leste) The variation in performance is even more striking Employing workers (Djibouti, Maldives) when the regulation has not been harmonized across countries. St. Vincent and the Grenadines emerges as the Registering property Botswana, Mauritius, Seychelles, Swaziland global leader in licensing for the construction industry. Getting credit Mauritius It takes 74 days and 10.6% of average income per capita Paying taxes Antigua and Barbuda, Estonia, Guinea-Bissau, Lesotho, Montenegro to meet all legal requirements to build a warehouse on Trading across borders Jamaica the outskirts of Kingstown. Compare this to 195 days in Enforcing contracts Estonia, Gambia, Guyana Dominica or to 34.9% of average annual income in St. Closing a business Micronesia Lucia. Similar differences can be found when transfer- ring property: St. Kitts and Nevis requires 81 days com- Source: Doing Business database (www.doingbusiness.org). OVER VIE W 3 TABLE 1.3 forms around the world. The indicators presented in this Caribbean countries can learn from each other report pinpoint the bottlenecks entrepreneurs face when Global Economy Indicator set ranking complying with business regulations. They also provide Dominica Starting a business 24 examples of effective reforms that can eliminate these St. Vincent and the Grenadines Dealing with licenses 1 bottlenecks, borrowing from the best practices within the region. And as the news about reform spreads, there Grenada Employing workers 34 is more interest in replicating success stories. St. Lucia Registering property 51 Trinidad and Tobago Getting credit 48 All OECS Protecting investors 19 Notes St. Lucia Paying taxes 9 1. The term “OECS� in this report refers to the 6 indepen- St. Kitts and Nevis Trading across borders 37 dent member states of the Organization of Eastern Carib- Antigua and Barbuda Enforcing contracts 47 bean States: Antigua and Barbuda, the Commonwealth of Jamaica Closing a business 23 Dominica, Grenada, the Federation of St. Christopher (St. Kitts) and Nevis, St. Lucia and St. Vincent and the Grena- Hypothetical ranking after adopting all best practices 14 dines. The OECS member territories Anguilla, the British Virgin Islands and Montserrat are not included. Source: Doing Business database (www.doingbusiness.org). 2. In this report “small state� refers to any country with a population of 1.5 million people or less, plus Botswana, pared to only 26 in Antigua and Barbuda. Guinea-Bissau, Jamaica, Lesotho and Namibia. The OECS countries can learn from each other. If 3. World Bank. 2004. Doing Business in 2005: Removing each OECS country were to adopt the region’s best prac- Obstacles to Growth. Washington, D.C. tice in each of the Doing Business indicators, they would 4. World Bank. 2005. Doing Business in 2006: Creating rank 14th in the world on the ease of doing business. Jobs. Washington, D.C. This means adopting St. Vincent and the Grenadines’s licensing regulations, Grenada’s labor regulations and St. Lucia’s tax code, for example (table 1.3). And where OECS countries do not match the global best perform- ers, lessons can be learned from good practices in other island economies such as Mauritius. Who is reforming among the OECS countries? Reforms are underway. Antigua and Barbuda separated its commercial registry from the country’s high court in 2005, reducing the time to start a business by 10 days. It also cut the corporate income tax from 35% to 30%. Other reforms are ongoing. Grenada is digitizing its registry records. St. Lucia is debating a new labor code and upgrading electronic processing systems at customs. Dominica has introduced a new value-added tax and Antigua and Barbuda plans to follow suit next year. Electronic customs systems are also under construction in other OECS countries. Yet more needs to be done. Reforms are needed to keep up with the rest of the world’s economies, two- thirds of which made at least one reform to improve the business environment last year. Studies like Doing Busi- ness can help. Since its inception in October 2003, the Doing Business project has inspired or informed 48 re- 4 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Starting a business When an entrepreneur draws up a business plan and Starting a business in the OECS is relatively hassle- tries to get underway, she must first face the bureaucracy free compared to other regions of the world. On aver- of registering the new firm. Countries differ in the way age, it takes 6 procedures, 32 days and costs about 28% they regulate the entry of new businesses. In some, the of income per capita. But there are wide differences process is straightforward and affordable. In others, the within the OECS. Antigua and Barbuda makes it easiest procedures are so burdensome that entrepreneurs either for entrepreneurs, and St. Kitts and Nevis the most dif- bribe officials to speed up the process or run their busi- ficult (table 2.1). Reforms can bring the region closer to nesses informally. the top international performers Australia and Canada, Doing Business documents all the procedures re- where it takes only 2 procedures, less than 3 days and quired for a domestically-owned small company to start between 1% and 2% of income per capita to start a busi- operations in general industrial or commercial activities. ness. The OECS can start by looking at Jamaica, which These include obtaining all necessary permits and licenses ranks number 10 globally on the ease of starting a busi- and completing all the required inscriptions, verifications ness. Entrepreneurs there can open a business in 8 days and notifications with the relevant authorities. The sur- with a cost of 9% of income per capita. vey calculates the cost and time necessary for completing The time to start a business varies within the each procedure under normal circumstances. OECS—from 12 days in St. Vincent and the Grenadines FIGURE 2.1 St. Vincent and the Grenadines—fastest start-up in the OECS TABLE 2.1 Time (days) Where is it easy to start a business, and where not? Iceland 5 OECS Global Economy ranking ranking St. Vincent and 12 the Grenadines Antigua and Barbuda 1 22 Dominica 19 Dominica 2 24 Antigua and Barbuda 21 St. Vincent and the Grenadines 3 29 St. Lucia 4 43 St. Lucia 40 Grenada 5 50 St. Kitts and Nevis 47 St. Kitts and Nevis 6 105 Grenada 52 Note: Rankings are the average of the country rankings on the procedures, time, cost and minimum capital for starting a business. See the Data notes for details. Source: Doing Business database (www.doingbusiness.org). Source: Doing Business database (www.doingbusiness.org). STARTING A BUSINESS 5 FIGURE 2.2 FIGURE 2.3 Start-up costs—low in Puerto Rico, high in the OECS Starting a business in Grenada Cost (% of income per capita) Time (days) Cost (% income per capita) Puerto Rico 0.8 60 40 Antigua and File with registry and receive Barbuda 12.5 company certificate St. Lucia 25.9 40 27 St. Kitts and Nevis 26.7 Cost Time Dominica 30.0 20 13 St. Vincent and 33.8 the Grenadines Grenada 37.2 0 0 1 4 Procedures Source: Doing Business database (www.doingbusiness.org). Source: Doing Business database (www.doingbusiness.org). to 52 days in Grenada (figure 2.1). The variation in The largest determinants of total cost for company cost is also significant. An entrepreneur in Antigua start-up in the OECS are lawyers’ and notary fees, fol- and Barbuda spends 12.5% of the country’s income per lowed by registration fees. Legal fees range from 50% capita to start up a business. Compare that with 33.8% to 90% of start-up costs and average EC$2,500. As a in St. Vincent and the Grenadines and 37.2% in Grenada percentage of income per capita, legal fees are higher (figure 2.2). in Grenada (25%) and Dominica (22%) and lower in Grenada requires the fewest procedures to open a Antigua and Barbuda (11%) and St. Kitts and Nevis business of any OECS country. But these procedures take (14%). Registration fees also vary widely—from EC$200 the longest time to complete due to slow agency interac- (Antigua and Barbuda) to EC$1,200 (Grenada). In St. tions (figure 2.3). After the entrepreneur files the regis- Kitts and Nevis, one third of start-up costs are paid for tration documents with the registry, the registrar then obtaining the business license. informs the tax authority and social security agency of Some reforms are underway. In Grenada, where the the proposed business. These agencies subsequently com- company registry is combined with the property registry, plete the registrations and inform the firm. This saves the lawyers take on average 3 days to search for a company entrepreneur trips to multiple agencies, but it still takes name. As one lawyer put it, “The room is always very over a month to complete all the registrations. Compare crammed and we are always fighting with our colleagues that to 7 days in Puerto Rico and 8 days in Jamaica. to get hold of the books.� Not surprisingly, mistakes The OECS countries have already harmonized their occur and duplicate company names exist. But this is companies acts, but the procedures required in each changing: an ongoing project will digitize all records. country to start a new business continue to vary. Busi- Antigua and Barbuda separated the company registry nesses in St. Vincent and the Grenadines and St. Kitts from the high court, cutting the registration time from and Nevis must obtain a separate business license, which 31 to 21 days. But records are still kept in paper format. increases the time and costs of starting a business. In St. The St. Kitts registry has an electronic database, but the Kitts and Nevis, entrepreneurs must complete an extra registry in Nevis, the island where most companies are procedure—obtaining the criminal record of the compa- registered, still uses paper records. ny’s directors. 6 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES What to reform Computerize records and introduce electronic name search Reduce the number of procedures Reforms to new business start-up can be simple, inex- Creating a unified electronic database of businesses can pensive and often do not require legislative changes. Ex- cut the time spent on business registration, especially if perience across the world shows how removing obstacles it links several government agencies. Also, countries can to business start-up is associated with new formal busi- benefit from using the internet. Online procedures such nesses, added jobs and more investment.1 OECS coun- as search for company name can cut start-up time and tries could simplify business start-up by eliminating pro- cost. Introducing electronic databases and online filing cedures such as the need to obtain criminal records or can reduce time to start a business by 50%.2 Moving for- general business licenses. These steps add bureaucratic ward, the OECS could follow the lead of the European hurdles to company registration and do not improve the Union and create a unified name database for businesses, quality of the business or how it serves the public. accessible online.3 Another way to simplify business start-up is by cre- ating a single access point for entrepreneurs, bringing officials from different agencies into a single location Notes or sharing information between agencies. Currently 1. World Bank. 2005. Doing Business in 2006: Creating Jobs. entrepreneurs in the OECS must separately register Washington, D.C. the company, obtain the tax identification number and 2. World Bank. 2004. Doing Business in 2005: Removing register for social security. Portugal introduced a fast- Obstacles to Growth. Washington, D.C. track system to start a business that cut the time from 3. European Business Register. 2006. http://www.ebr.org. 54 to 8 days last year. The reform reduced the number of approvals and government visits in business start- up. It was implemented in 5 months and cost around US$350,000. Guatemala also linked commercial, tax and social security registration last year. 7 Dealing with licenses In 2004, Hurricane Ivan swept through the Caribbean construction requires a thorough review of the existing leaving a massive trail of destruction and claiming regulations and adjustment as needed on the basis of dozens of lives. Grenada was the worst hit, with 90% practical experience. of homes suffering damage. In the days following the Doing Business measures the procedures, time and devastating storm, the BBC reported that: “Ivan left Gre- costs involved for a typical medium-size company to nada a wasteland of flattened houses, twisted metal, and construct a 2-story warehouse in the country’s largest splintered wood.� Grenadians realized that the damage city. The warehouse complies with all zoning and build- stemmed in part from poor construction practices, with ing regulations. It has electricity, water and sewerage few or inadequate building inspections and frequent fail- connections, as well as a fixed phone line. ure to meet established building code standards. On average, it takes 11 procedures, 127 days and Stricter codes result in fewer deaths—except when 24% of the average OECS country’s income per capita regulation is so burdensome that construction compa- for a builder to comply with all regulations. Across the nies go around them altogether. Control of the process OECS countries, however, there are wide variations. St. by the government is unrealistic. Yet letting businesses Vincent and the Grenadines is the world’s top performer do what they like can result in disaster. Striking the and OECS leader (table 3.1). It takes 11 procedures, 74 right balance between consumer safety and affordable days and costs 10.6% of income per capita to build a TABLE 3.1 TABLE 3.2 St. Vincent and the Grenadines—global #1 Who regulates licensing the most, and who the least? OECS Global Cost Economy ranking ranking Procedure Time (% income Economy (number) (days) per capita) St. Vincent and the Grenadines 1 1 St. Vincent and the Grenadines 11 74 10.6 St. Kitts and Nevis 2 7 St. Kitts and Nevis 14 72 15.2 St. Lucia 3 10 St. Lucia 9 139 34.9 Grenada 4 12 Grenada 8 142 36.5 Antigua and Barbuda 5 15 Antigua and Barbuda 12 139 27.8 Dominica 6 34 Dominica 11 195 16.8 Note: Rankings are the average of the country rankings on the procedures, time andcost to build a warehouse. See the Data notes for details. Source: Doing Business database (www.doingbusiness.org). Source: Doing Business database (www.doingbusiness.org). 8 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES warehouse there. St. Kitts and Nevis and St. Lucia also up and drive him to the site. This takes time and most rank in the top 10. Building a warehouse is most difficult people don’t do it.� in Dominica, where costs are lower but it takes 195 days Lack of inspections and irregular enforcement also to comply with all procedures (table 3.2). compromise worker safety on building sites. A respon- The variation across islands is partly due to different dent in St. Kitts and Nevis comments: “Local contractors processing times by the local planning authorities. In do not enforce proper safety standards at the construc- Dominica it can take up to 7 months for the licensing tion sites. Hard hats are not worn consistently and authority to process and approve a building plan (fig- workers often walk barefoot on the site.� In contrast, ure 3.1). In St. Kitts and Nevis and St. Vincent and the international contractors working in OECS countries Grenadines, this process takes 1 month. impose more stringent occupational health and safety Lost time and multiple administrative procedures standards to meet their insurance requirements. More- are costly in and of themselves. So are the associated over, foreign firms tend to abide by the building codes of fees for building plan approvals, utility connections their country of origin and choose to hire independent and inspections. These processes are most expensive inspectors such as certified engineers or designers to in Grenada, where the cost is equivalent to 36.5% of inspect their sites. income per capita. The high fees charged for building plan approvals stand out in particular. St. Lucia follows, with fees costing 34.5% of income per capita. There, the What to reform high cost is due to high charges for electrical, fire and building plan approvals. In contrast, a local construction Introduce risk-based inspections company in St. Vincent and the Grenadines spends only Currently, inspections are inconsistent across OECS 10.6% of income per capita and in Dominica, 16.8%. countries. In Antigua, the building code requires 10 Effective construction regulation goes beyond the inspections for each building site but these rarely occur. speed and cost of completing a construction job. Pro- A better approach would be to introduce risk-based tecting public safety and health through an effective inspections: one inspection once the foundation is laid inspection system is also important. Across the OECS and another after construction is completed. This would countries, inspections are rare. In St. Kitts and Nevis, un- ensure that the building is in compliance with the sub- announced inspections take place 4 or 5 times through- mitted plans and that faulty work is not masked or safety out the building process. In Dominica, buildings are jeopardized. The current movement throughout the inspected 3 times. In Grenada, St. Lucia and Antigua Caribbean to standardize inspection procedures and im- and Barbuda, no inspections are carried out. One rea- prove building code enforcement is a welcome reform. son is lack of transport for the development authorities. An engineer in Antigua and Barbuda notes: “If I want Adopt a “silence is consent� rule my site inspected, I have to call the inspector, pick him Time is money for businesses. Often, entrepreneurs do FIGURE 3.1 not know when their building application will be ap- Building a warehouse in Dominica—burdensome proved. Sometimes the application process takes longer than actual construction. To avoid the time uncertainty, Time to build a warehouse (days) a statutory time limit can be set for officials to respond 200 to and decide on an application. If the time limit is ex- Installation of electrical lines ceeded, consent is automatically inferred and the project 150 proceeds. This approach would be most appropriate for administrative procedures where safety is not critical. 100 Consolidate project clearances and provide Apply for environmental impact asessment information to builders to improve transparency 50 Apply for planning permission In St. Lucia, builders must get sign-off on the technical specifications of building plans from the Health Depart- 0 1 Procedures 11 ment, the Ministry of Communications and Works, the Fire Department, and the Development Control Author- Source: Doing Business database (www.doingbusiness.org). DEALING WITH LICENSES 9 Do not mandate use of specific sources for materials ity. Negotiating the bureaucracy takes 4 to 5 months. In St. Vincent and the Grenadines, all project clearances The Commonwealth Act, which applies to all OECS are consolidated into one office—the Development Plan- member countries, requires construction companies to ning Authority—and the clearance process takes only 1 purchase materials from within CARICOM. In 2005, month. there was a cement shortage in St. Kitts and Nevis. Con- Unless one is a seasoned contractor in Antigua and tractors eager to keep their projects on track wanted to Barbuda, it would be close to impossible to find out all import cement from Colombia. Such imports require the steps and procedures required to obtain a building cabinet-level approval, which proved to be burdensome permit. “It’s a shot in the dark and you just hope you get and slowed down construction by several months. Hav- it right,� one respondent comments. “Even the govern- ing no restrictions on construction materials would ment printery does not have copies of the building code.� enable contractors to adapt to market conditions as they A publicly available chart showing which offices to visit, arise, helping keep costs down so that local industries when and with what documents, and listing the offices’ stay competitive. addresses, working hours and contact numbers, would save builders a lot of time and frustration. Provide on-the-job training to development authority staff Respondents across the OECS countries point to the poor capacity of the local authorities to review building plans and carry out on-site inspections. “It’s not the fault of the people who work in the Development Control Au- thority. They simply don’t receive any on-the-job train- ing and have no resources to inspect building sites,� says an Antiguan contractor. Development authority capacity would improve with staff training and sufficient budget and transport resources to enable inspections. 10 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Employing workers Employment regulations are designed to protect workers regulation is supposed to protect are hurt the most. from arbitrary, unfair or discriminatory actions by their Labor regulations in OECS countries are relatively employers. These regulations—from mandatory mini- flexible compared to the global average (table 4.1). St. mum wage, to premiums for overtime work, grounds for Lucia’s labor regulations offer the most flexibility to em- dismissal and severance pay—have been introduced to ployers, while Dominica’s, the least. But OECS countries remedy apparent market failures. still fall behind the world’s top performers. Top perform- But each point of regulation creates a new restric- ers include other small states such as Maldives and the tion on a company’s ability to use its workforce effec- Marshall Islands as well as larger economies like Hong tively. Governments struggle to reach the right balance Kong (China) and the United States. between labor market flexibility and job stability. Most Hiring employees in OECS countries is relatively developing countries err on the side of excessive rigidity, easy. Each country allows fixed-term contracts, giving to the detriment of businesses and workers alike. The less businesses the flexibility to hire more workers when flexible the regulations, the more businesses will find a demand for their products rises, without imposing high way around them—hiring workers informally, paying costs for dismissal if demand declines. Such contracts them low wages and avoiding health insurance or other can be used for any type of task and do not limit the social benefits (figure 4.1). Those whom employment duration of the contract. FIGURE 4.1 Rigid employment regulation, more informality Informal sector (share of GDP) TABLE 4.1 Where is employing workers easy, and where not? Greater OECS Global Economy ranking ranking St. Lucia 1 29 Grenada 2 34 St. Kitts and Nevis 3 35 Antigua and Barbuda 4 40 Lesser St. Vincent and the Grenadines 5 48 Easiest Most difficult Dominica 6 50 Countries ranked by ease of employing workers, quintiles Note: Relationships are significant at the 1% level and remain significant when controlling Note: Rankings are the average of the country rankings on the difficulty of firing and the cost of for income per capita. firing indices. See the Data notes for details. Source: Doing Business database (www.doingbusiness.org), Schneider and Klinglmair (2004). Source: Doing Business database (www.doingbusiness.org). EMPLOYING WORKERS 11 Restrictions in working hours, however, lower OECS rounding severance pay vary widely. St. Kitts and Nevis countries’ performance on the Doing Business employing is the most restrictive, requiring 60 weeks of severance, workers measurement. Employees working more than 8 followed by St. Lucia with 56 weeks. Grenada is the least hours a day or during a weekend or holiday must receive burdensome, requiring only 20 weeks of severance pay overtime pay equal to at least one and a half times the reg- for an employee of 20 years (table 4.2). ular wage, except in St. Lucia where such compensation Making labor regulations more flexible is about is only required for weekend overtime work. In Domi- creating jobs. But the message is often lost in bad mar- nica, few restaurants are open on Sundays and holidays keting on the part of reformers. Opponents of flexible because of these regulations, according to respondents employment stall reforms by pitting business against of our survey. This creates a net financial loss in the tour- workers. Rigid regulation indeed benefits a select group ism sector. Yet such rigid regulations allegedly increase of incumbent workers, but it shuts out others from a job workers’ welfare. In economies driven by the highs and in the formal sector altogether. And when someone does lows of tourism, agribusiness and construction, workers lose a job, it is harder to find a new one. might prefer that employers adjust to changing demand through flexible working hours rather than through the alternatives: termination or informal work. What to reform Redundancy regulations are also important. Em- ployers in OECS countries benefit from relatively flexible Allow flexible working hours firing laws—they are not required to notify a third party To accommodate fluctuations in demand, businesses prior to dismissal, or to solicit third party approval. But sometimes need to have longer workweeks. The current if a company needs to let people go, obstacles do exist. premiums for overtime work result in higher production In St. Kitts and Nevis and in St. Vincent and the Grena- costs and lost competitiveness. To meet a temporary dines, an employer must notify the labor commissioner 20% increase in demand, labor costs in OECS countries first if the company is to make more than 10 employees increase by 30%. Other countries (Hungary, Czech Re- redundant. Dominica, St. Vincent and the Grenadines public) have addressed these swings by allowing swaps and St. Kitts and Nevis have priority rules for reemploy- of working hours between peak and low times. Coun- ment, requiring employers to first rehire senior staff that tries that move to more flexible working hours can bring were previously dismissed. labor costs down considerably. Long dismissal notification periods and high sev- erance pay requirements can also be burdensome to Move from severance pay to unemployment employers. Notification times are similar across OECS insurance countries and are low compared to the global average, Rather than requiring high severance payments which ranging from 1 month in Antigua and Barbuda to 2 often hit a troubled business at the worst possible time, months in St. Kitts and Nevis. In contrast, rules sur- OECS countries could introduce unemployment insur- ance. This shifts the focus of regulation from protecting jobs to helping workers deal with the transition to a new TABLE 4.2 job when it becomes necessary. Severence pay—high in the OECS Introduce a unified labor code Firing cost Economy (weeks of salary) As CARICOM integration advances, more people and Grenada 20 especially youth will take advantage of job opportunities Antigua and Barbuda 48 away from their home islands. Greater flexibility in labor Dominica 49 regulations and a unified labor code would facilitate this St. Vincent and the Grenadines 54 growing labor mobility, which in turn will lead to higher St. Lucia 56 employment levels in the region. St. Kitts and Nevis 60 Source: Doing Business database (www.doingbusiness.org). 12 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Registering property Helen, the owner of a retail company in Basseterre, wants and Timor-Leste. In Maldives, companies are not al- to buy a warehouse outside of town to store her extra lowed to transfer property at all. In the Marshall Islands, inventory. She has identified the property she wants and only one property has been registered in the last year and negotiated a good deal with the owner. But it will take al- that process took 2 years and multiple disputes. most 3 months and will cost 13.3% of the property value The OECS countries fare better. Still, registering to legally transfer the property title. Helen doesn’t have property there is costly. A domestic entrepreneur spends that much money. The deal is put on hold. on average 47 days and 11% of property value to transfer Making it difficult to transfer title on property dis- title of land from one owner to another.1 Transferring title courages investment. When it is too burdensome to go is easiest in St. Lucia and Antigua and Barbuda (table through the official channels, owners transfer ownership 5.1). Registration is most difficult in St. Kitts and Nevis informally. Governments lose transfer tax revenue. Own- and Grenada. The best performer, St. Lucia, ranks 51st out ers lose clear title to their land. And the ability to use the of the 175 countries measured by Doing Business on the land as collateral for a business loan can be lost. ease of registering property. Grenada ranks 145th. Among the 175 economies measured by Doing Busi- In St. Lucia the entrepreneur needs 20 days from start ness, 4 small island states prove most difficult to register to finish to transfer the title on a piece of property—the property—the Maldives, Marshall Islands, Micronesia shortest time among OECS countries. But there are wide FIGURE 5.1 Almost 3 months to register property in St. Kitts and Nevis TABLE 5.1 Time (days) Where is it easy to register property, and where not? Singapore 9 OECS Global Economy ranking ranking St. Lucia 20 St. Lucia 1 51 Antigua and Barbuda 26 Antigua and Barbuda 2 71 St. Vincent and the Grenadines 37 Dominica 3 78 St. Vincent and the Grenadines 4 101 Dominica 40 St. Kitts and Nevis 5 136 Grenada 77 Grenada 6 145 St. Kitts and 81 Nevis Note: Rankings are the average of the country rankings on the procedures, time and cost to register property. See the Data notes for details. Source: Doing Business database (www.doingbusiness.org). Source: Doing Business database (www.doingbusiness.org). REGISTERING PROPERT Y 13 differences between St. Lucia and the rest. In Antigua and is done online and takes only a few minutes. Barbuda, it takes 26 days to register property. It takes over Registering property is also expensive in OECS 5 weeks in St. Vincent and the Grenadines and Dominica, countries—ranging from 7.3% to 13.3% of property and more than 11 weeks in Grenada and St. Kitts and value. Costs come largely from stamp duties and other Nevis (figure 5.1). taxes, followed by legal fees, since lawyers complete St. Lucia has the shortest process for transferring most of these procedures on behalf of their clients. In title on property. It takes 5 steps: the lawyer searches Antigua and Barbuda, Dominica and St. Kitts and Nevis, the title at the land registry, checks for encumbrances at the costs add up to over 13% of property value (figure the High Court, parties pay taxes at the Inland Revenue 5.3). Compare that with Slovakia and New Zealand, Authority, the lawyer prepares the deed of sale and reg- where entrepreneurs pay only 0.1%. St. Lucia and Gre- isters the title deed with the land registry. The last step nada have the lowest costs among the OECS countries accounts for 14 out of the 20 days needed to complete studied but they are still higher than in other Caribbean the transfer (figure 5.2). Other OECS countries require economies. The cost in Belize is 5% of property value, similar procedures, with some additions. In St. Kitts Guyana 4.5%. and Nevis, the land plan must be verified by a surveyor, Stamp duties and other taxes and fees vary from causing a delay of 2 weeks. Obtaining clearance from the country to country. Grenada has the lowest stamp duty water authority takes 2 weeks in Grenada. Property valu- at 1% of property value, but also charges 5% transfer tax. ation in St. Vincent and the Grenadines takes 9 days. Property owners in St. Kitts and Nevis face the highest The longest delays are at the property registries. stamp duties at 12%, followed by 10% for St. Vincent and Often, the registries are overloaded and lack sufficient the Grenadines and Antigua and Barbuda. In Dominica, staff. In St. Vincent and the Grenadines, lawyers must registration fees add another cost of 2.5% of property search large books page by page for encumbrances. One value, and in St. Vincent and the Grenadines it is 2%. respondent in Dominica summarized her experience at Often, both the buyer and the seller must pay taxes and the registry: “There is not enough staff and the method stamp duties. is laborious. It requires physical handling of documents and takes anywhere from a couple of weeks up to several months.� Just receiving confirmation of the title takes What to reform time. In addition to property titles, the registry in St. Kitts and Nevis also handles deeds of conveyance, bills Digitize records and introduce online access of sale, intellectual property, probate, marriages, friendly Evidence shows that efficient property registration is societies, newspapers and trade unions. It takes 2 months associated with greater access to land and finance.2 It to register the title transfer. Antigua and Barbuda is the is also linked with less corruption and informality. Re- most efficient, with 7 days to register the transfer. Still, formers in OECS countries should follow the lead of St. the time can be shortened—in New Zealand the process Lucia, Antigua and Barbuda and Grenada to fully digitize FIGURE 5.2 FIGURE 5.3 Registering property in St. Lucia Registering property in the OECS—expensive Time to register property Cost Cost (% of property value) (days) (% of property value) Kiribati 0.1 21 6 St. Lucia 7.3 Cost Time Grenada 7.6 14 4 St. Vincent and 11.9 Register title deed the Grenadines with land registry Antigua and Barbuda 13.0 7 2 Dominica 13.0 0 0 St. Kitts and 13.3 1 5 Nevis Procedures Source: Doing Business database (www.doingbusiness.org). Source: Doing Business database (www.doingbusiness.org). 14 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES registry records. Dominica has an electronic database of records which cuts the time to search the title to one day, although the actual title certificates are paper-based. Grenada expects to fully digitize its records by 2008. All records from 1992 are already available electronically. The next step will be to introduce online title search, execution and registration—following the example of the Netherlands and Australia. Consolidate and reduce taxes and fees Countries in the OECS could also cut stamp duties and other fees. This does not necessarily mean reducing government revenues. High costs encourage informal transactions and underreporting of property values. Government revenue is lost and the title security for property owners falls. In 2005, 15 countries (includ- ing Costa Rica and Nicaragua) reduced or eliminated transfer tax and stamp duties. Another simple reform is to consolidate payments. Grenada’s entrepreneurs must complete 3 separate steps to comply with registration payments—stamp duty, transfer tax and registration fee. One single payment, preferably at the registrar, would save them time in completing the transaction. Notes 1. Doing Business records all the procedures necessary to transfer a property title from the seller to the buyer when a domestic company purchases land and a building. The case of a foreign buyer is not measured. See the Data notes for details. 2. World Bank. 2004. Doing Business in 2005: Removing Obstacles to Growth. Washington, D.C. 15 Getting credit Access to credit is consistently cited by the private sector Credit information sharing allows creditors to dis- as one of the greatest barriers to growing a business in tinguish good borrowers from bad, price loans correctly OECS countries. Small businesses are constrained the and reduce the costs of client screening. This can be done most. Doing Business covers two dimensions of access to through a public credit registry or a private credit bureau. credit in the OECS: access to credit information and the Access to credit information has expanded in many legal rights of borrowers and lenders. Where lenders have countries but not yet in the OECS. The Dominican more information about potential borrowers, they can Republic has started offering more information on out- make better loans to a broader base of customers. And, standing loans and on-time payments. The Dominican where a broad pool of assets may be pledged and lenders Republic, Honduras and Portugal are also allowing bu- can collect them easily, more loans are extended. reaus to use public sources of credit information, such as Getting credit is difficult across the OECS (table court files, when preparing their credit reports. Mauritius 6.1). All six countries fall in the bottom half of the global established a new credit registry in 2005 (figure 6.1). ranking on the ease of getting credit. The main reasons There are no credit information agencies in the include the lack of a credit information system and OECS. Currently, credit information on borrowers is weaknesses in the regulations affecting the legal rights only available through informal data-sharing agree- of borrowers and lenders. FIGURE 6.1 Expanding credit information TABLE 6.1 Depth of credit information index (0–6) 2005 2006 Getting credit—difficult in the OECS OECS Global Dominican Republic Economy ranking ranking El Salvador Honduras United Kingdom .. 1 Nicaragua Hong Kong, China .. 2 Thailand Grenada 1 83 Kazakhstan St. Vincent and the Grenadines 2 83 Bulgaria Antigua and Barbuda 3 101 China Dominica 4 101 Georgia St. Lucia 5 101 Algeria St. Kitts and Nevis 6 117 Mauritius 0 1 2 3 4 5 6 Source: Doing Business database (www.doingbusiness.org). Source: Doing Business database (www.doingbusiness.org). 16 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES ments between banks. Lenders must contact multiple tion proceedings. banks to get client references—which can take up to 3 Out-of-court enforcement, which allows creditors days. References are usually general and can be mislead- to seize and sell collateral without court involvement, is ing. According to one respondent, “It’s as vague as you unavailable in four of the OECS states. Creditors in Gre- can imagine. Sometimes other banks would try to pass nada and St. Kitts and Nevis can seize and sell collateral on bad clients to us by presenting them in a better light without a judicial order. But in the other OECS countries than they deserve, while if they try to attract a client, it’s judicial intervention is required. This often takes a long the opposite.� A bank might indicate that “the client has time. In St. Lucia for example, land foreclosure can take been delinquent on a 6-digit loan,� but no specific figures up to 7 years. or details of the delinquency are shared. When the type of security is agreed upon, lenders Collateral laws regulate which assets firms can use want to check for existing rights to the collateral. The as security to raise capital—from a farmer pledging his best way is through an efficient and well-organized cow for a tractor loan to the securitization of loan port- collateral registry. While all OECS countries have reg- folios that drives mortgage finance in the United States. istries that handle collateral in one form or another, no By providing creditors with a right to an asset on default, country has a specialized collateral registry. OECS reg- collateral also reduces a lender’s cost for screening loan istries are also paper-based, which often causes delays in applicants. And well-designed collateral agreements the creation and enforcement of security rights. facilitate the efficient sale and liquidation of bankrupt Registering collateral takes 2 days in St. Kitts and firms, if this should become necessary. Nevis, Antigua and Barbuda and Dominica, but up to 15 Doing Business measures 10 areas affecting the rights days in Grenada. Even though the same legal procedures of borrowers and creditors. Grenada and St. Vincent and apply across the OECS, delays are caused due to overbur- the Grenadines score 7 out of 10 on the strength of legal dened registrar facilities. The situation is most difficult in rights index. St. Lucia, Dominica and Antigua and Bar- Grenada. Ever since Hurricane Ivan destroyed Grenada’s buda are in the middle with 6, while St. Kitts and Nevis supreme court and interrupted business and legal activ- scores 5. Although a global leader in this area is Hong ity, the Grenadian registry has been confined to one Kong (China), poor countries such as Kenya also score room. Its staff still faces a large backlog of requests. The well (figure 6.2). current effort to create an electronic registry should help A common weakness in all OECS countries is the address the problem and is expected to significantly treatment of secured creditors in liquidation proceed- reduce the time to register collateral. ings. The Companies Act, which is harmonized across the OECS, stipulates that in liquidation proceedings the tax and employee claims rank before debt to secured What to reform creditors. This makes creditor risk higher. Worldwide, 62% of countries rank secured creditors first in liquida- Establish a credit information system The need for a credit information-sharing system in FIGURE 6.2 Who has the most legal rights, and who the least? OECS countries is apparent. Private credit bureaus have been more successful worldwide than public bureaus. Strength of legal rights index (0–10) Regulations permit them to collect data from various Hong Kong (China) sources—banks, utility companies, etc. and provide both Kenya positive and negative credit information. When India Grenada St. Vincent and established a new consumer credit bureau in 2005, it the Grenadines enabled banks to check the credit history of more than St. Lucia 12 million borrowers in the first year. Antigua and Barbuda Credit bureaus also allow banks to share the fixed Dominica cost of having a credit information system, which ben- Jamaica efits the banks and their customers. With the move Trinidad and Tobago towards further CARICOM integration and the growing St. Kitts and Nevis cross-country movement of individuals and companies, 0 2 4 6 8 10 the need for a unified OECS-wide credit bureau will Source: Doing Business database (www.doingbusiness.org). GE T TING CREDIT 17 Introduce electronic collateral registry grow further. Companies creating multi-country opera- tions are likely to borrow from banks in their new host More than 25 countries make the collateral registry islands, while individuals will seek credit as they settle accessible electronically. Those that do often have sig- in jurisdictions away from home in their pursuit of job nificantly faster registration and more credit, controlling opportunities. for other factors. The Romanian registry permits notice filing and is online, allowing creditors to check for exist- Provide general asset descriptions in secured ing liens instantly. transactions When banks in the OECS set up collateral agreements, Refrain from credit subsidies they accept a limited set of assets as security: land, ve- Access to credit is critical to ensure strong business hicles and inventory. They also require detailed descrip- growth—and a lack of access affects small business the tions of the assets, such as a vehicle’s chassis and engine most. Problems often lie in weak credit information numbers. This forces borrowers to continually revise the systems and weak collateral laws. Reformers should ad- collateral agreement every time an asset leaves the pool. dress these areas first. Some have been tempted by the Expanding the assets that can be used as collateral, al- idea that subsidies can increase access to credit. But ex- lowing for a rotating pool of assets and providing general perience shows otherwise. Before being closed in 2005, asset descriptions makes it easier for borrowers to secure Mexico’s Banrural, which subsidized loans for farmers, a loan and for lenders to approve it. lost $20 million a month. Every dollar of loans cost 30 cents to process, and more than 45% of loans were Enable out-of-court enforcement nonperforming. Worse, the continued subsidies kept out Ensuring that out-of-court enforcement does not col- sound lending from private banks. lapse at the first objection of the debtor cuts enforce- ment time by three-quarters on average. The less courts are involved, the shorter the time and the more willing creditors are to lend. But if the case does go to court, summary proceedings can improve efficiency by limit- ing the debtor’s ability to delay the process. Armenia has recently encouraged enforcement out of court by remov- ing the requirement that summary judgment be agreed to by both parties following a debtor’s default. 18 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Protecting investors Financial markets can prosper where laws regulate self- OECS countries fall short, however, in the disclosure dealing—the use of corporate assets for personal gain— required for large transactions involving a corporate and punish looting by corporate insiders. Regulations insider (table 7.1). The OECS regulations require full can encourage equity financing by requiring companies disclosure to the board of directors in case one of its to report on their operations and allowing investors to members has a conflict of interest in a company’s trans- vet major actions by the company. Where small investors action, but no immediate disclosure of the transaction to see a high risk of expropriation, they do not invest. the shareholders or the public is required. Nor is a review The harmonized companies acts and civil procedure of the transaction by an external expert required. Mexico codes provide the foundation for strong corporate gov- recently reformed its laws to require all of these things. ernance in OECS countries. Based on these provisions, Investors do have redress against directors who the OECS score 6.3 out of a maximum of 10 possible harm the company for their own profit. The companies points in the Doing Business protecting investors’ mea- acts permit investors to recover damages against any surements. New Zealand—the global best performer— director when the company’s actions are unfair or preju- scores 9.7 (figure 7.1). Because all the applicable laws dicial to minority shareholders. Investors may also void are harmonized, there is no variation among the OECS the harmful transaction, although the director cannot be countries. fined or imprisoned for it. And while at trial, investors FIGURE 7.1 New Zealand tops the global ranking in investor protections Strength of investor protection index (0–10) 10 8 OECS score 6 4 Regional average Jamaica Fiji Norway Mauritius United States Singapore New Zealand for Latin America Note: Scores on the strength of investor protection index are the average of each country’s performance on the extent of disclosure, extent of director liability and ease of shareholder suit indices. See the Data notes for details. Source: Doing Business database (www.doingbusiness.org). PROTEC TING INVESTORS 19 FIGURE 7.1 have extensive rights to access information and chal- Who protects investors the most, and who the least? lenge witnesses in court. Strength of The Eastern Caribbean Stock Exchange’s effort to Extent of Extent of Ease of investor disclosure director shareholder protection create new corporate governance principles is a good index liability index suit index index start to strengthening investor protections. Around the New Zealand 10 9 10 9.7 world, since 2004, 13 countries have increased their Israel 7 9 9 8.3 disclosure requirements: Israel, Italy, Mexico, Pakistan, Mauritius 6 8 9 7.7 Peru, Romania, Spain, Sweden, Thailand, Turkey, United OECS 4 8 7 6.3 Kingdom and Vietnam. Broader disclosure require- France 10 1 5 5.3 ments can deepen investor trust—thereby deepening Iceland 4 5 6 5.0 investment—in OECS companies. Source: Doing Business database (www.doingbusiness.org). 20 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Paying taxes All businesses complain about taxes. But governments St. Lucia has the lowest tax burden among OECS need to collect taxes to provide the public goods neces- countries, paying 31.5% of commercial profits1 and sary for businesses to grow and society to prosper. Yet ranks 9th out of 175 economies (table 8.1). Businesses there are good and bad ways to collect taxes. In many in St. Vincent and the Grenadines and Dominica also developing countries tax evasion is high because rates pay about a third of commercial profits in taxes. The are high, administration is complex and people feel their tax burden is higher in Grenada (42.8%), Antigua and tax money is wasted. Barbuda (48.5%) and St. Kitts and Nevis (52.7%) (figure Doing Business records all the taxes paid by a me- 8.1). Corporate income tax and payroll taxes account for dium-size company during its second year of operations. the majority of tax payments. But businesses in OECS To allow comparisons across countries, Doing Business countries also pay several stamp duties. For example, measures all taxes—including corporate income tax, Antigua and Barbuda, Grenada and St. Lucia charge a social security contributions and labor taxes paid by small fixed amount on check transactions. the employer, property taxes, dividend tax, capital gains Some OECS countries are reforming. Antigua and tax, financial transactions tax, waste collection taxes and Barbuda lowered corporate tax by 5% in 2005. This fol- vehicle and road taxes—paid by a standardized firm. lows an international trend: 23 countries reduced profit Consumption taxes such as sales tax or value-added tax tax in 2005. After the reform in Antigua and Barbuda, are excluded. FIGURE 8.1 St. Lucia—lowest tax burden in the OECS TABLE 8 .1 Total tax rate (% of commercial profits) Where is it easy to pay taxes, and where not? Economy Global ranking Mauritius 24.8 St. Lucia 9 St. Lucia 31.5 Dominica 20 St. Vincent and 33.6 Solomon Islands 23 the Grenadines Seychelles 24 Dominica 34.8 St. Vincent and the Grenadines 32 Grenada 42.8 Grenada 45 Antigua and Barbuda 48.5 St. Kitts and Nevis 116 St. Kitts and 52.7 Antigua and Barbuda 145 Nevis Note: Rankings are the average of the country rankings on the number of payments, time and total tax rate. See the Data notes for details. Source: Doing Business database (www.doingbusiness.org). Source: Doing Business database (www.doingbusiness.org). PAYING TAXES 21 corporate income tax rates in all OECS countries are at What to reform 30% except St. Kitts and Nevis, which charges 35%. The rates are higher than in other countries such as Chile Allow electronic filing and payment (17%) or Puerto Rico (19%). Dominica introduced a Tax compliance is greater if the tax administration is value added tax in March 2006 to replace 4 separate simple and transparent. Permitting direct transfer of taxes on goods and services. Antigua and Barbuda will the company’s financial data into electronic tax forms follow in 2007. allows tax declarations to be processed faster and more Doing Business also measures the complexity of tax efficiently by the tax authorities. This can be especially administration. Complex tax systems encourage tax eva- useful for labor taxes, which require the majority of time sion. The OECS country with the lowest tax burden, St. for complying with taxes in OECS countries. Lucia, is also where businesses spend the fewest hours per year complying with tax regulations. It takes 41 Keep tax rates moderate and consolidate the hours per year to comply with St. Lucia’s business tax number of taxes regulations—the 4th shortest time in the world and 5 Moderate corporate income tax rates with fewer exemp- times less than the OECS country average of 225 hours tions can broaden the tax base and increase revenue. (figure 8.2). Compare that to Antigua and Barbuda, But reform should go beyond cutting profit taxes, which where entrepreneurs spend 528 hours and must pay 3 globally account for only 36% of the tax burden on busi- different payroll taxes every month, in person and at 3 nesses. One place to start is with stamp duties, such as different locations. St. Kitts and Nevis has the second the tax on check transactions. Minor excise taxes and longest time to file taxes among the OECS countries. It stamp duties are costly to administer and do not raise has 4 different payroll taxes, but they can be paid at the much revenue. Reformers in the OECS can also focus on same location. consolidating payroll taxes. A good example is Slovakia, Discretionary tax concessions also add to the com- which combined all health, unemployment and pension plexity and cost of dealing with taxes. Efforts are un- payments into a single social contribution tax. derway in Antigua and Barbuda to reduce the number of discretionary tax concessions by setting criteria for Cut back special treatment granting incentives. Yet a new draft law still provides for Political interests and lobbying often create a multiplic- extensive use of concessions. These incentives include ity of tax incentives and other privileges. The OECS tax holidays and exemptions for certain sectors, such as countries are no exception. Special privileges erode the tourism. Governments also grant discretionary conces- tax base but only a few countries have dared to eliminate sion packages to individual investors. The effects are well- them. Estonia is one that has. In 1994, it introduced documented in terms of forgone revenue and distortions a 26% flat tax on corporate and personal income and in allocation of resources.2 Big businesses with political eliminated all concessions. Tax revenues increased. clout tend to benefit; small businesses do not. FIGURE 8.2 Paying taxes takes longest in Antigua and Barbuda Notes 1. Commercial profits are defined as sales minus cost of # Number of payments goods, minus labor costs, minus other deductible ex- penses, minus deductible provisions, plus capital gains St. Lucia 16 41 Time (hours per year) (from a property sale), minus interest expense, plus inter- est income and minus commercial depreciation. Dominica 30 65 2. See Sosa, Sebastian. 2006. “Tax Incentives and Invest- ment in the Eastern Caribbean.� IMF Working Paper Grenada 30 140 WP/06/23, Washington, D.C.; Chai, Jingqing, and Rishi St. Vincent and 21 208 Goyal. 2005. “Tax Concessions and Foreign Direct Invest- the Grenadines ment in the ECCU.� IMF Country Report No. 05/305. St. Kitts and 23 368 Washington, D.C.; and Miller, Sutherland et al. 2004. Nevis “The Investor Roadmap and Sectoral Analysis of Domi- Antigua and Barbuda 44 528 nica and The Antigua and Barbuda Investor Roadmap.� The Services Group, Arlington, VA. Studies commis- sioned by USAID. Source: Doing Business database (www.worldbank.org). 22 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Trading across borders Trade is critical for the OECS countries. It represents a goods. The process starts with preparing the original doc- high percentage of GDP—124% on average—and tariffs uments and continues through the goods’ transport to its make up over half of government revenues. And many final destination in a major city. Across OECS countries, trade regulations have improved. Special and differential it is easier to export a good than import one. St. Kitts and treatment preferences have eroded. New opportunities Nevis tops the rankings for ease of importing and export- for trade are emerging through agreements such as the ing in the OECS. Dominica is at the bottom (table 9.1). Caribbean Single Market Economy. Yet costly delays, Importing a good into an OECS country takes on document preparation and administrative fees continue average 16 days and requires 8 documents. St. Kitts and to slow business in these countries. One importer shares Nevis and St. Vincent and the Grenadines are typically his experience: “I’ve had a shipment from the UK sitting faster at 13 days, while St. Lucia and Grenada are typi- in the port warehouse for a month. The process is simply cally slower at 19 and 20 days respectively (figure 9.1).1 not moving. Everything sits on someone’s desk. Only if The costs, which exclude customs duties, vary from the head of customs decides to clear my papers am I able US$756 in St. Kitts and Nevis to US$1,513 in Dominica. to get my goods.� Compare that with the lowest costs worldwide: Singapore Doing Business compiles the steps, time and cost (US$333) and Tonga (US$360). Exporting goods from required to import and export a standardized cargo of OECS member countries takes on average 13 days. It is FIGURE 9.1 Importing into OECS countries—costly TABLE 9.1 Time and cost to import Who makes it easy to import and export, and who does not? US$ per container 0 400 800 1,200 1,600 OECS Global COST TIME Economy ranking ranking St. Kitts and T Nevis St. Kitts and Nevis 1 37 Grenada T St. Lucia 2 45 St. Lucia T Antigua and Barbuda 3 47 St. Vincent and T St. Vincent and the Grenadines 4 48 the Grenadines Grenada 5 84 Antigua and T Barbuda Dominica 6 97 Dominica T 0 5 10 15 20 Note: Rankings are the average of the country rankings on the documents, time and cost required Days to import and export. See the Data notes for details. Source: Doing Business database (www.doingbusiness.org). Source: Doing Business database (www.doingbusiness.org). TRADING ACROSS BORDERS 23 fastest and requires less paperwork in St. Lucia. But the not set up to be compatible, reducing opportunities to costs are lower in St. Kitts and Nevis and St. Vincent and reap economies of scale in regional shipping of products. the Grenadines (figure 9.2). Improving customs efficiency is only part of the All OECS countries require at least 4 documents for story. Eliminating import licenses is another way to ease the import of goods—bill of lading, invoice, certificate the burden on importers and exporters. A recent study of origin and customs declaration. But additional docu- showed that each OECS country required trade licenses ments vary across countries. Antigua and Barbuda and and import quotas for an average of 50 products from St. Vincent and the Grenadines require importers to have outside CARICOM.2 In Antigua and Barbuda, imports of special import licenses. In St. Kitts and Nevis, each im- 80 products and any import from 34 countries require an porter must obtain a port gate pass. Dominica asks for 13 import license. Different agencies are involved in grant- documents from its importers. Meeting these bureaucratic ing the licenses. And the criteria to grant the licenses are requirements takes 7 days of the import agent’s time. not always clear. OECS countries can learn from each other’s best Port infrastructure and services also matter. Even practices. In St. Lucia, exporters fill out a single elec- though port and terminal fees make up the largest im- tronic document for export administration, speeding port and export costs, respondents in St. Lucia complain time through customs. Clearing customs is also fast about the poor condition of equipment at the port. Re- in Dominica, St. Lucia and St. Vincent and the Grena- spondents in Grenada cite port services as a bottleneck, dines—only 1 day. But it takes on average 3 days in Anti- mainly due to staff absenteeism and charges for services gua and Barbuda and 4 days in Grenada, despite relatively not rendered. Both add to the cost of importing and ex- small volumes involved. Delays are compounded by the porting—in time and money. lack of training of customs officials, and confusion over classification and valuation systems for goods. Restaurant and hotel owners often complain about delays at customs What to reform for food imports. Given the importance of tourism in Continue improvements on electronic data OECS countries, ensuring fast clearance of supplies for exchange and processing this sector can contribute to making it more competitive internationally. Electronic filing can allow early submission and fast Ongoing reforms aim to improve this. St. Lucia is up- approval of customs forms—before the cargo reaches grading its ASYCUDA++ electronic system at customs, the port. Singapore introduced electronic filing at cus- improving technology that had been in place for over a toms, cutting the cargo clearance time from 4 days to 30 decade. The new system allows traders to directly input minutes. Mauritius adapted Singapore’s technology with customs declarations. New electronic systems are being similar results. Jamaica introduced software that detects implemented in St. Kitts and Nevis and are planned in incomplete customs documents and calculates custom Antigua and Barbuda. However, these new systems are duties. Electronic payment of duties is the next step. FIGURE 9.2 OECS countries can also learn from the ongoing efforts Exporting from OECS countries—13 days on average in St. Lucia. And, given the high cost of implementing computerized customs systems, sharing the effort across Time and cost to export US$ per container OECS member states is a good option. 0 1,000 2,000 3,000 4,000 COST OECS average T TIME Introduce risk assessment for inspections across OECS countries Tonga United States Procedures at the port take longer when physical in- Estonia spections cover 100% of imports like in Antigua and Barbuda, Dominica and St. Vincent and the Grenadines. Mauritius Costs increase too. In Antigua and Barbuda and Domi- Jamaica nica, customs officials often work overtime to complete Guyana the inspections, with the import broker paying for it. In 0 10 20 30 40 contrast, officials in St. Kitts and Nevis, St. Lucia and Days Grenada inspect randomly, depending on the history Source: Doing Business database (www.doingbusiness.org). 24 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES of the importer and the nature of the cargo. This is the Notes right approach but the share of cargo inspected is vari- able—from about 60% in St. Kitts and Nevis, to 30-40% 1. Doing Business measures the time and cost for importing and exporting goods from a variety of countries. Since in St. Lucia, to rarely in Grenada. goods coming into and going out of the OECS typically transfer through larger ports in the region, Doing Busi- Reduce the number of import licenses ness calculates the time and cost for this transfer stage Licenses add to the burden for importers but do not add (6 days and $356 dollars.) Such transshipment treatment significantly to the quality of the goods coming in or is consistent with the calculations for all 175 countries Doing Business measures, and affects the outcomes for to government revenue. Eliminating this bureaucratic several countries, including Fiji, Vanuatu, Papua New requirement would speed trade by reducing the time Guinea, Solomon Islands, Seychelles and some Eastern traders spend checking paperwork at customs. European countries, as well as the OECS countries. 2. World Bank. 2005. “Towards a New Agenda for Growth: Improve customs administration Organization of Eastern Caribbean States.� Washington, Reformers in Antigua and Barbuda and Grenada could D.C. set a time limit of 1 day for going through customs, as in Thailand. Some countries have also introduced perfor- mance indicators to measure the efficiency of customs. They can be used to identify bottlenecks and reward the most efficient customs officials with bonuses. Continue with regional trade integration initiatives Efficient customs and trade transport are associated with more trade and lower costs for exporters. Continued integration in the region can help achieve this. Greater harmonization of customs and transport procedures can help reduce costly delays, while increasing trade volume. 25 Enforcing contracts Commercial courts should be fast, fair and affordable. days and 578 days. But even the top OECS performers Long delays force businesses to look for other means of lag significantly behind other economies. In Lithuania, resolving disputes. But efficiency and fairness need to commercial disputes are handled within 166 days and in be balanced, and the complexity of judicial procedures the Gambia the average is 247 days (figure 10.1). should be proportionate to the claim. The variation among OECS countries is rooted Despite an identical code of civil procedure dictating mainly in the administration of the courts. Antigua and the process for commercial court cases, there is a strik- Barbuda benefits from a resident judge who handles ing difference among OECS countries on the efficiency commercial disputes, but St. Kitts and Nevis, Grenada of contract enforcement. The top performers are Anti- and St. Vincent and the Grenadines depend on a rotating gua and Barbuda and St. Vincent and the Grenadines judge who can hear commercial cases only 6 weeks dur- (table 10.1), where it takes 297 and 394 days respectively ing the year. Although the rotating judge system func- from the time a claim is submitted until a judgment is tioned well when initially introduced, today respondents enforced. In contrast, the same process is much more call the judge “stretched� and unable to keep up with burdensome in Dominica and St. Lucia, where it takes case volume. “Today I got a trial date for January 2007. 681 days and 635 days, respectively. St. Kitts and Nevis It was the first spot available. The judges just can’t keep and Grenada occupy the middle of the range with 583 up,� says one practitioner in St. Lucia. Foreign investors FIGURE 10.1 Enforcing a contract—slower in the OECS TABLE 10.1 Time to enforce a contract (days) Where is it easy to enforce contracts, and where not? Lithuania 166 OECS Global Gambia 247 Economy ranking ranking Antigua and Barbuda 297 Antigua and Barbuda 1 47 Haiti 368 St. Vincent and the Grenadines 2 125 St. Vincent and the Grenadines 394 St. Kitts and Nevis 3 135 Jamaica 415 Grenada 4 143 Grenada 578 Dominica 5 159 St. Kitts and Nevis 583 St. Lucia 6 160 St. Lucia 635 Dominica 681 Note: Rankings are the average of the country rankings on the procedures, time and cost for enforcing contracts through the courts. See the Data notes for details. Source: Doing Business database (www.doingbusiness.org). Source: Doing Business database (www.doingbusiness.org). 26 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES FIGURE 10.2 Foreign investors avoid countries with inefficient courts What to reform Foreign direct investment (% of national income, 2005) Expedited enforcement for simple debt disputes Vietnam If the creditor can present the judge with evidence of 3.0 China the transaction and nonpayment, summary proceed- Mexico ings would permit immediate recovery of the debt. Such 2.0 reform can cut significantly the time it takes to decide Egypt a commercial case. One step further is to take the cases 1.0 Pakistan India out of court altogether and give them to bailiffs for direct enforcement. If the claim is not disputed, the need for a 0 300 600 900 1,200 1,500 court process would be eliminated, which in turn would Time to enforce a contract (days) bring down enforcement time. If the case is contested be- Note: The figure excludes Indonesia, Nigeria and Russia, large emerging economies with substantial foreign participation in extractive industries. fore the bailiff, the case would be referred back to court. Source: Doing Business database (www.doingbusiness.org), World Bank World Development Indicators (2006). Make enforcement competitive The best way to speed recovery of overdue debt is to take note as well, and globally tend to avoid countries allow competition in enforcing judgments. Colombia with inefficient courts (figure 10.2). did this in 2003 by scrapping the monopoly of the courts Lack of resident judges is only part of the story. The to enforce judges’ rulings. Private companies quickly magistrate courts, whose primary function is to reduce moved into the business. The result: time was cut by 2 the burden of the high courts by handling low-value months. Moving the bailiffs out of the court system and cases, also suffer from serious inefficiencies. Taking a hiring private firms to enforce claims could have similar case to the magistrate court in Antigua and Barbuda is impact in OECS countries. more time consuming than taking it to the high court. “I prefer to go to the high court. I have a 10-year-old case Introduce performance-based incentives for sitting in the magistrate’s court. I have written dozens of court staff letters and have yet to get a response,� shares one Anti- Court staff in OECS countries are often poorly trained guan lawyer. But when operating properly, magistrate and not well organized. According to one respondent, courts can resolve simple commercial matters efficiently “My case files are often displaced. When this happens and effectively. St. Kitts and Nevis recently expanded the (and it happens frequently), I don’t know what to tell my reach of magistrate courts by amending the civil proce- clients. It’s embarrassing and frustrating for both me and dural code to increase the value of claims heard by the my clients.� Another respondent says: “I sent a letter of court from EC$10,000 to EC$25,000. acknowledgement to the high court and the staff would not accept it because the person who handles these was on vacation. I had to take my letter back and wait for the person to get back. It’s absurd.� Providing court staff with training and introducing performance-based incentives for their work would help address these capacity gaps. 27 Closing a business Good bankruptcy laws reassure lenders that they will procedures takes 2 years, while in Antigua and Barbuda not lose their money if the borrower’s business goes sour. 3 years are needed. One contributor in Antigua and Bar- Small firms in countries with long and costly bankruptcy buda ascribes this delay to poor record-keeping: “Many procedures get only 9% of their capital from bank loans companies don’t prepare balance sheets, so we need to while large firms get 34%.1 In countries with efficient draft their financial statements from scratch. We have one bankruptcy procedures the difference is only 4 percent- case that has dragged on for 10 years.� In Ireland, which age points. sets the global standard in bankruptcy efficiency, the pro- Bankruptcy law is rarely used in OECS countries. cess typically takes less than 6 months (table 11.1). Out of the 6 countries covered in this report, only Anti- Antigua and Barbuda is among the global best gua and Barbuda and St. Lucia see at least 5 bankruptcy performers in terms of cost of going through bank- cases a year. St. Kitts and Nevis, Dominica, Grenada and ruptcy, along with Singapore, Kuwait, the Netherlands, St. Vincent and the Grenadines sometimes see cases of Colombia and Norway. In all of these countries, the cost bankruptcy, but these are rare. Lack of practice is fre- of bankruptcy proceedings amounts to 1% of the value quently a symptom of poor or non-existing regulations of the estate. In St. Lucia, going through bankruptcy is but this is not the case in the OECS. The Companies Act, more expensive: 9% of estate value. harmonized across the OECS member states, outlines One of the goals of bankruptcy is to maximize the bankruptcy provisions for all countries. total value of proceeds received by creditors, share- Despite the common regulations, implementation holders, employees and other stakeholders. Businesses time and costs differ. In St. Lucia, completing bankruptcy should be rehabilitated, sold as a going concern, or liquidated—whichever generates the greatest total value. TABLE 11.1 St. Lucia performs slightly better than Antigua and Bar- Ireland—efficient bankruptcy procedures, low lending rate buda in this area. The recovery rate for creditors in St. Cost Recovery Lending Lucia is 42.2%, while in Antigua and Barbuda it is 37.3%. Time (% of rate rate This is mainly due to lending rate differentials. The Economy (years) estate value) (%) (%) higher the lending rate, the lower the recovery rate and Ireland 0.4 9.0 87.9 2.8 vice versa. Antigua and Barbuda lends at 13.11%, while Japan 0.6 4.0 92.7 1.6 St. Lucia’s rate is 9.92%. Not surprisingly, Japan tops the Singapore 0.8 1.0 91.3 5.3 list in terms of recovery rate, with 92.7%, supported by a St. Lucia 2.0 9.0 42.2 9.9 1.63% lending rate.2 Antigua and Barbuda 3.0 1.0 37.3 13.1 Source: Doing Business database (www.doingbusiness.org). 28 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES But to recover a greater share of their investment, Place secured creditors higher on the hierarchy creditors have to be given priority in bankruptcy pro- of claimants ceedings. In all OECS countries, creditors rank behind government debt—including taxes, employee benefits, In the process of claim settlement, creditors in OECS etc. This reduces the likelihood that creditors will re- countries rank behind all government debt, including cover anything. taxes, social security payments and wage claims. In 62% of countries around the world, secured creditors receive priority above all other claimants. Other countries have What to reform introduced wage caps, which entitle workers to a certain amount of wages first, followed by secured creditors and Introduce time limits to avoid delays other government debt. Placing secured creditors higher Introducing time limits to certain steps in the bank- on the claimants’ hierarchy in the OECS would increase ruptcy case can reduce delays. The United States has the likelihood of debt recovery for creditors, thus reduc- made it more difficult for debtors in reorganization to ing investor risk and leading to higher overall levels of cause delays. Debtors have 120 days to propose a reor- investment. ganization plan. While the previous law allowed bank- ruptcy judges to extend this period at their discretion, the new law allows only 1 extension of up to 18 months. Notes As a result, creditors can now push earlier for liquidation 1. Galindo, Arturo, and Alejandro Micco. 2005. “Bank of unviable businesses. In Macedonia, a new bankruptcy Credit to Small and Medium-Sized Enterprises: The Role law introduces strict deadlines: some appeals must now of Creditor Protections.� Working Paper 347. Central be resolved in as little as 8 days. And the claims in a Bank of Chile, Santiago. bankruptcy case there can now be consolidated, which 2. International Monetary Fund. 2005. http://sima.world- bank.org/ifs/. will reduce delays and improve secured creditors’ ability to enforce their claims. DATA NOTES 29 Data notes The indicators presented and analyzed in Doing Business The Doing Business methodology has 5 limitations that publications measure business regulation and the protection should be considered when interpreting the data. First, the of property rights—and their effect on businesses, especially collected data refer to businesses in the country’s most popu- small and medium-size domestic firms. First, the indicators lous city and may not be representative of regulatory practices document the degree of regulation, such as the number of in other parts of the country. Second, the data often focus on procedures to start a business or register commercial prop- a specific business form—a limited liability company of a erty. Second, they gauge regulatory outcomes, such as the specified size—and may not be representative of the regula- time and cost to enforce a contract, go through bankruptcy tion on other businesses, for example, sole proprietorships. or trade across borders. Third, they measure the extent of Third, transactions described in a standardized case study legal protections of property, for example, the protections of refer to a specific set of issues and may not represent the full investors against looting by company directors or the scope set of issues a business encounters. Fourth, the measures of of assets that can be used as collateral according to secured time involve an element of judgment by the expert respon- transactions laws. Fourth, they measure the flexibility of dents. When sources indicate different estimates, the time employment regulation. Finally, a set of indicators docu- indicators reported in Doing Business publications represent ments the tax burden on businesses. The data for all sets of the median values of several responses given under the as- indicators in Doing Business 2007: Organization of Eastern sumptions of the case study. Fifth, the methodology assumes Caribbean States are for March 2006. that a business has full information on what is required and The Doing Business data are collected in a standardized does not waste time when completing procedures. In prac- way. To start, the Doing Business team, with academic ad- tice, completing a procedure may take longer if the business visers, designs a survey. The survey uses a simple business lacks information or is unable to follow up promptly. case to ensure comparability across countries and over The laws and regulations underlying the Doing Business time—with assumptions about the legal form of the busi- data are now available on the Doing Business website at ness, its size, its location and the nature of its operations. http://www.doingbusiness.org. All the sample surveys and Surveys are administered through local experts, including the details underlying the indicators are also published on lawyers, business consultants, accountants, government of- the website. Questions on the methodology and challenges ficials and other professionals routinely administering or to data may be submitted through the “Ask a Question� func- advising on legal and regulatory requirements. These experts tion on the Doing Business home page. Updated indicators, as have several rounds of interaction with the Doing Business well as any revisions of or corrections to the printed data, are team, involving conference calls, written correspondence posted continuously on the website. and country visits. 30 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Economy characteristics Region and income group Gross national income (GNI) per capita Doing Business uses the World Bank regional and income Doing Business 2007: Organization of Eastern Caribbean group classifications, available at http://www.worldbank.org/ States reports 2005 income per capita as published in the data/countryclass/countryclass.html. World Bank’s World Development Indicators 2006. Income is calculated using the Atlas method (current US$). For cost in- Population dicators expressed as a percentage of income per capita, 2005 Doing Business 2007 reports midyear 2005 population statis- GNI in local currency units is used as the denominator. tics as published in World Development Indicators 2006. Starting a business • Leases the commercial plant and offices and is not a proprietor of real estate. Doing Business records all procedures that are officially re- • Does not qualify for investment incentives or any special quired for an entrepreneur to start up and formally operate benefits. an industrial or commercial business. These include obtain- • Has up to 50 employees 1 month after the commencement ing all necessary licenses and permits and completing any of operations, all of them nationals. required notifications, verifications or inscriptions for the • Has a turnover of at least 100 times income per capita. company and employees with relevant authorities. • Has a company deed 10 pages long. After a study of laws, regulations and publicly available information on business entry, a detailed list of procedures Procedures is developed, along with the time and cost of complying with A procedure is defined as any interaction of the company each procedure under normal circumstances and the paid-in founder with external parties (government agencies, lawyers, minimum capital requirements. Subsequently, local incorpo- auditors, notaries). Interactions between company found- ration lawyers and government officials complete and verify ers or company officers and employees are not counted the data. On average 4 law firms participate in each country. as procedures. Procedures that must be completed in the Information is also collected on the sequence in which same building but in different offices are counted as sepa- procedures are to be completed and whether procedures may rate procedures. The founders are assumed to complete all be carried out simultaneously. It is assumed that any required procedures themselves, without middlemen, facilitators, ac- information is readily available and that all agencies involved countants or lawyers, unless the use of such a third party is in the start-up process function efficiently and without cor- mandated by law. ruption. If answers by local experts differ, inquiries continue Both pre- and post-incorporation procedures that are until the data are reconciled. officially required for an entrepreneur to formally operate To make the data comparable across countries, several as- a business are recorded. Procedures that are not required sumptions about the business and the procedures are used. to start and formally operate a business are ignored. For ex- ample, obtaining exclusive rights over the company name is Assumptions about the business not counted in a country where businesses may use a number The business: as identification. • Is a limited liability company. If there is more than one Procedures required for official correspondence or trans- type of limited liability company in the country, the actions with public agencies are included. For example, if a limited liability form most popular among domestic company seal or stamp is required on official documents, firms is chosen. Information on the most popular form such as tax declarations, obtaining it is counted. Similarly, if is obtained from incorporation lawyers or the statistical a company must open a bank account before registering for office. sales tax or value added tax, this transaction is included as a • Operates in the country’s most populous city. procedure. Shortcuts are counted only if they fulfill 3 criteria: • Is 100% domestically owned and has 5 owners, none of they are legal, they are available to the general public, and whom is a legal entity. avoiding them causes substantial delays. • Has start-up capital of 10 times income per capita at the Only procedures required of all businesses are covered. end of 2005, paid in cash. Industry-specific procedures are excluded. For example, • Performs general industrial or commercial activities, such procedures to comply with environmental regulations are as the production or sale of products or services to the included only when they apply to all businesses conducting public. It does not perform foreign trade activities and general commercial or industrial activities. Procedures that does not handle products subject to a special tax regime, for example, liquor or tobacco. The business is not using the company undergoes to connect to electricity, water, gas heavily polluting production processes. and waste disposal services are not included. DATA NOTES 31 Time Dealing with licenses Time is recorded in calendar days. The measure captures the median duration that incorporation lawyers indicate is nec- Doing Business records all procedures required for a busi- essary to complete a procedure. It is assumed that the mini- ness in the construction industry to build a standardized mum time required for each procedure is 1 day. Although warehouse as an example of dealing with licenses. These procedures may take place simultaneously, they cannot start procedures include obtaining all necessary licenses and per- on the same day. A procedure is considered completed once mits, receiving all required inspections and completing all the company has received the final document, such as the required notifications and submitting the relevant documents company registration certificate or tax number. If a procedure (for example, building plans and site maps) to the authorities. can be accelerated for an additional cost, the fastest proce- Doing Business also records procedures for obtaining utility dure is chosen. It is assumed that the entrepreneur does not connections, such as electricity, telephone, water and sewer- waste time and commits to completing each remaining pro- age. Procedures necessary to be able to use the property as cedure without delay. The time that the entrepreneur spends collateral or transfer it to another business are also counted. on gathering information is ignored. It is assumed that the The survey divides the process of building a warehouse into entrepreneur is aware of all entry regulations and their se- distinct procedures and calculates the time and cost of com- quence from the beginning but has had no prior contact with pleting each procedure under normal circumstances. any of the officials. Information is collected from construction lawyers, con- Cost struction firms, utility service providers and public officials who deal with building regulations. To make the data com- Cost is recorded as a percentage of the country’s income per parable across countries, several assumptions about the busi- capita. Only official costs are recorded. The company law, the ness, the warehouse project and the procedures are used. commercial code and specific regulations and fee schedules are used as sources for calculating costs. In the absence of fee Assumptions about the construction company schedules, a government officer’s estimate is taken as an offi- cial source. In the absence of a government officer’s estimate, The business (BuildCo): estimates of incorporation lawyers are used. If several incor- • Is a limited liability company. poration lawyers provide different estimates, the median re- • Operates in the country’s most populous city. ported value is applied. In all cases the cost excludes bribes. • Is 100% domestically owned and has 5 owners, none of whom is a legal entity. Paid-in minimum capital • Carries out construction projects, such as building a The paid-in minimum capital requirement reflects the amount warehouse. that the entrepreneur needs to deposit in a bank before regis- • Has up to 20 builders and other employees, all of them tration starts and is recorded as a percentage of the country’s nationals with the technical expertise and professional income per capita. The amount is typically specified in the experience necessary to develop architectural and technical commercial code or the company law. Many countries have plans for building a warehouse. a minimum capital requirement but allow businesses to pay Assumptions about the warehouse project only a part of it before registration, with the rest to be paid after the first year of operation. The warehouse: • Has 2 stories and approximately 14,000 square feet (1,300.6 This methodology was developed by Simeon Djankov, Rafael La square meters). Each floor is 9 feet, 10 inches (3 meters) Porta, Florencio López-de-Silanes and Andrei Shleifer in “The high. Regulation of Entry.� Quarterly Journal of Economics 117 (1): • Is located in a periurban area of the country’s most 1–37. 2002. populous city. • Is located on a land plot of 10,000 square feet (929 square meters), which is 100% owned by BuildCo and is accurately registered in the cadastre and land registry. • Is a new construction (there was no previous construction on the land). • Has complete architectural and technical plans. • Will be connected to electricity, water, sewerage and one land phone line. The connection to each utility network will be 32 feet, 10 inches (10 meters) long. • Will require a 10-ampere power connection and 140 kilowatts of electricity. • Will be used for storing books. 32 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Procedures Assumptions about the worker A procedure is any interaction of the company’s employees The worker: or managers with external parties, including government • Is a nonexecutive, full-time male employee who has agencies, public inspectors, notaries, the land registry and worked in the same company for 20 years. cadastre and technical experts apart from architects and • Earns a salary plus benefits equal to the country’s average engineers. Interactions between company employees, such wage during the entire period of his employment. as development of the warehouse plans and inspections • Is a lawful citizen with a wife and 2 children. The family conducted by employees, are not counted as procedures. resides in the country’s most populous city. Procedures that the company undergoes to connect to elec- • Is not a member of a labor union, unless membership is tricity, water, sewerage and phone services are included. All mandatory. procedures that are legally or in practice required for build- ing a warehouse are counted, even if they may be avoided in Assumptions about the business exceptional cases. The business: Time • Is a limited liability company. • Operates in the country’s most populous city. Time is recorded in calendar days. The measure captures the median duration that local experts indicate is necessary • Is 100% domestically owned. to complete a procedure. It is assumed that the minimum • Operates in the manufacturing sector. time required for each procedure is 1 day. If a procedure • Has 201 employees. can be accelerated legally for an additional cost, the fast- • Abides by every law and regulation but does not grant est procedure is chosen. It is assumed that BuildCo does workers more benefits than what is legally mandated. not waste time and commits to completing each remaining • Is subject to collective bargaining agreements in countries procedure without delay. The time that BuildCo spends where such bargaining covers more than half the on gathering information is ignored. It is assumed that manufacturing sector. BuildCo is aware of all building requirements and their Rigidity of employment index sequence from the beginning. The rigidity of employment index is the average of three sub- Cost indices: a difficulty of hiring index, a rigidity of hours index Cost is recorded as a percentage of the country’s income per and a difficulty of firing index. All the subindices have several capita. Only official costs are recorded. The building code, components. And all take values between 0 and 100, with specific regulations and fee schedules and information from higher values indicating more rigid regulation. local experts are used as sources for costs. If several local The difficulty of hiring index measures (i) whether term partners provide different estimates, the median reported contracts can be used only for temporary tasks; (ii) the value is used. All the fees associated with completing the maximum cumulative duration of term contracts; and (iii) procedures to legally build a warehouse, including utility the ratio of the minimum wage for a trainee or first-time hook-up, are included. employee to the average value added per worker. A country is assigned a score of 1 if term contracts can be used only for temporary tasks and a score of 0 if they can be used for any Employing workers task. A score of 1 is assigned if the maximum cumulative du- ration of term contracts is less than 3 years; 0.5 if it is between Doing Business measures the regulation of employment, spe- 3 and 5 years; and 0 if term contracts can last 5 years or more. cifically as it affects the hiring and firing of workers and the Finally, a score of 1 is assigned if the ratio of the minimum rigidity of working hours. The data on employing workers wage to the average value added per worker is higher than are based on a detailed survey of employment regulations 0.75; 0.67 for a ratio greater than 0.50 and less than or equal that is completed by local law firms. The employment laws of to 0.75; 0.33 for a ratio greater than 0.25 and less than or most countries are available online in the NATLEX database, equal to 0.50; and 0 for a ratio less than or equal to 0.25. In published by the International Labour Organization. Laws Country X, for example, term contracts are allowed only for and regulations as well as secondary sources are reviewed temporary tasks (a score of 1), and they can be used for a to ensure accuracy. Conflicting answers are further checked maximum of 2 years (a score of 1). The ratio of the mandated against 2 additional sources, including a local legal treatise on minimum wage to the value added per worker is 0.66 (a score employment regulation. of 0.67). Averaging the three subindices and scaling the index To make the data comparable across countries, several as- to 100 gives Country X a score of 89. sumptions about the worker and the business are used. The rigidity of hours index has 5 components: (i) whether night work is unrestricted; (ii) whether weekend work is un- DATA NOTES 33 restricted; (iii) whether the workweek can consist of 5.5 days; Firing cost (iv) whether the workweek can extend to 50 hours or more The firing cost indicator measures the cost of advance notice (including overtime) for 2 months a year; and (v) whether requirements, severance payments and penalties due when paid annual vacation is 21 working days or fewer. For each of terminating a redundant worker, expressed in weekly wages. these questions, if the answer is no, the country is assigned One month is recorded as 4 and 1/3 weeks. a score of 1; otherwise a score of 0 is assigned. For example, Country Y imposes restrictions on night work (a score of 1) and weekend work (a score of 1), allows 5.5-day workweeks This methodology was developed by Juan C. Botero, Simeon (a score of 0), permits 50-hour workweeks for 2 months (a Djankov, Rafael La Porta, Florencio López-de-Silanes and score of 0) and requires paid vacation of 20 working days (a Andrei Shleifer in “The Regulation of Labor.� Quarterly score of 0). Averaging the scores and scaling the result to 100 Journal of Economics 119 (4): 1339–82. 2004. gives a final index of 40 for Country Y. The difficulty of firing index has 8 components: (i) whether redundancy is disallowed as a basis for terminating Registering property workers; (ii) whether the employer needs to notify a third party (such as a government agency) to terminate 1 redun- Doing Business records the full sequence of procedures dant worker; (iii) whether the employer needs to notify a necessary when a business purchases land and a building third party to terminate a group of more than 20 redundant to transfer the property title from the seller to the buyer so workers; (iv) whether the employer needs approval from a that the buyer can use the property for expanding its busi- third party to terminate 1 redundant worker; (v) whether ness, as collateral in taking new loans or, if necessary, to sell the employer needs approval from a third party to terminate to another business. Every required procedure is included, a group of more than 20 redundant workers; (vi) whether whether it is the responsibility of the seller or the buyer or the law requires the employer to consider reassignment or must be completed by a third party on their behalf. Local retraining options before redundancy termination; (vii) property lawyers and property registries provide information whether priority rules apply for redundancies; and (viii) on required procedures as well as the time and cost to com- whether priority rules apply for reemployment. For the first plete each of them. question an answer of yes for workers of any income level To make the data comparable across countries, several gives a score of 10 and means that the rest of the questions do assumptions about the business, the property and the proce- not apply. An answer of yes to question (iv) gives a score of dures are used. 2. For every other question, if the answer is yes, a score of 1 is assigned; otherwise a score of 0 is given. Questions (i) and Assumptions about the business (iv), as the most restrictive regulations, have greater weight in The business: the construction of the index. In Country Z, for example, redundancy is allowed as • Is a limited liability company. grounds for termination (a score of 0). An employer has to • Is located in a periurban area of the country’s most both notify a third party (a score of 1) and obtain its approval populous city. (a score of 2) to terminate a single redundant worker, and • Is 100% domestically and privately owned. has to both notify a third party (a score of 1) and obtain its • Has 50 employees, all of whom are nationals. approval (a score of 1) to terminate a group of redundant • Performs general commercial activities. workers. The law mandates consideration of retraining or alternative placement before termination (a score of 1). There Assumptions about the property are priority rules for termination (a score of 1) and reemploy- The property: ment (a score of 1). Adding up the scores and scaling to 100 • Has a value of 50 times income per capita. gives a final index of 80 for Country Z. • Is fully owned by another domestic limited liability company. Nonwage labor cost • Has no mortgages attached and has been under the same The nonwage labor cost indicator measures all social security ownership for the past 10 years. payments (including retirement fund; sickness, maternity • Is adequately measured and filed in the cadastre, registered and health insurance; workplace injury; family allowance; in the land registry and free of title disputes. and other obligatory contributions) and payroll taxes associ- • Is located in a periurban commercial zone, and no ated with hiring an employee in fiscal year 2005. The cost is rezoning is required. expressed as a percentage of the worker’s salary. • Consists of land and a building. The land area is 6,000 square feet (557.4 square meters). A 2-story warehouse of 10,000 square feet (929 square meters) is located on the land. The warehouse is 10 years old, is in good condition 34 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES and complies with all safety standards, building codes and other legal requirements. The property of land and Getting credit building will be transferred in its entirety. • Will not be subject to renovations or additional building Doing Business constructs measures of the legal rights of following the purchase. borrowers and lenders and the sharing of credit information. • Has no trees, natural water sources, natural reserves or The first set of indicators describes how well collateral and historical monuments of any kind. bankruptcy laws facilitate lending. The second set measures • Will not be used for special purposes, and no special the coverage, scope, quality and accessibility of credit infor- permits, such as for residential use, industrial plants, mation available through public and private credit registries. waste storage or certain types of agricultural activities, are The data on the legal rights of borrowers and lenders are required. gathered through a survey of financial lawyers and verified • Has no occupants (legal or illegal), and no other party through analysis of laws and regulations as well as public holds a legal interest in it. sources of information on collateral and bankruptcy laws. Procedures The data on credit information sharing are built in two stages. First, banking supervision authorities and public informa- A procedure is defined as any interaction of the buyer or the tion sources are surveyed to confirm the presence of public seller, their agents (if an agent is legally or in practice required) credit registries and private credit information bureaus. or the property with external parties, including government Second, when applicable, a detailed survey on the public or agencies, inspectors, notaries and lawyers. Interactions be- private credit registry’s structure, law and associated rules tween company officers and employees are not considered. is administered to the credit registry. Survey responses are All procedures that are legally or in practice required for verified through several rounds of follow-up communication registering property are recorded, even if they may be avoided with respondents as well as by contacting third parties and in exceptional cases. It is assumed that the buyer follows the consulting public sources. The survey data are confirmed fastest legal option available and used by the general public. through teleconference calls in most countries. Although the business may use lawyers or other professionals where necessary in the registration process, it is assumed that Strength of legal rights index it does not employ an outside facilitator in the registration The strength of legal rights index measures the degree to process unless legally or in practice required to do so. which collateral and bankruptcy laws protect the rights of Time borrowers and lenders and thus facilitate lending. The index includes 7 aspects related to legal rights in collateral law and Time is recorded in calendar days. The measure captures the 3 aspects in bankruptcy law. A score of 1 is assigned for each median duration that property lawyers or registry officials in- of the following features of the laws: dicate is necessary to complete a procedure. It is assumed that • General rather than specific description of assets is the minimum time required for each procedure is 1 day. Al- permitted in collateral agreements. though procedures may take place simultaneously, they can- • General rather than specific description of debt is not start on the same day. It is assumed that the buyer does permitted in collateral agreements. not waste time and commits to completing each remaining • Any legal or natural person may grant or take security in procedure without delay. If a procedure can be accelerated the property. for an additional cost, the fastest legal procedure available • A unified registry operates that includes charges over and used by the general public is chosen. If procedures can movable property. be undertaken simultaneously, it is assumed that they are. It • Secured creditors have priority outside of bankruptcy. is assumed that the parties involved are aware of all regula- • Secured creditors, rather than other parties such as tions and their sequence from the beginning. Time spent on government or workers, are paid first out of the proceeds gathering information is not considered. from liquidating a bankrupt firm. Cost • Secured creditors are able to seize their collateral when a debtor enters reorganization; there is no “automatic stay� Cost is recorded as a percentage of the property value, as- or “asset freeze� imposed by the court. sumed to be equivalent to 50 times income per capita. Only • Management does not stay during reorganization. An official costs required by law are recorded, including fees, administrator is responsible for managing the business transfer taxes, stamp duties and any other payment to the during reorganization. property registry, notaries, public agencies or lawyers. Other • Parties may agree on enforcement procedures by contract. taxes, such as capital gains tax or value added tax, are ex- • Creditors may both seize and sell collateral out of court cluded from the cost measure. If cost estimates differ among without restriction. sources, the median reported value is used. DATA NOTES 35 The index ranges from 0 to 10, with higher scores indicating Private credit bureau coverage that collateral and bankruptcy laws are better designed to The private credit bureau coverage indicator reports the num- expand access to credit. ber of individuals or firms listed by a private credit bureau Depth of credit information index with current information on repayment history, unpaid debts or credit outstanding. The number is expressed as a percent- The depth of credit information index measures rules affect- age of the adult population. A private credit bureau is defined ing the scope, accessibility and quality of credit information as a private firm or nonprofit organization that maintains a available through either public or private credit registries. A database on the creditworthiness of borrowers (persons or score of 1 is assigned for each of the following 6 features of businesses) in the financial system and facilitates the exchange the credit information system: of credit information among banks and financial institutions. • Both positive (for example, amount of loan and on-time Credit investigative bureaus and credit reporting firms that repayment pattern) and negative (for instance, number do not directly facilitate information exchange between banks and amount of defaults, late payments, bankruptcies) credit information is distributed. and other financial institutions are not considered. If no pri- vate bureau operates, the coverage value is 0. • Data on both firms and individuals are distributed. • Data from retailers, trade creditors or utilities as well as This methodology was developed by Simeon Djankov, Caralee financial institutions are distributed. McLiesh and Andrei Shleifer in “Private Credit in 129 Countries.� • More than 2 years of historical data are distributed. Forthcoming in the Journal of Financial Economics. • Data on loans above 1% of income per capita are distributed. • By law, borrowers have the right to access their data. Protecting investors The index ranges from 0 to 6, with higher values indicating Doing Business measures the strength of minority shareholder the availability of more credit information, from either a pub- protections against directors’ misuse of corporate assets for lic registry or a private bureau, to facilitate lending decisions. personal gain. The indicators distinguish 3 dimensions of In Turkey, for example, both a public and a private registry investor protection: transparency of transactions (extent of operate. Both distribute positive and negative information disclosure index), liability for self-dealing (extent of director (a score of 1). The private bureau distributes data only on liability index) and shareholders’ ability to sue officers and individuals, but the public registry covers firms as well as in- directors for misconduct (ease of shareholder suits index). dividuals (a score of 1). The public and private registries share The data come from a survey of corporate lawyers and are data among financial institutions only; no data are collected based on company laws, court rules of evidence and securi- from retailers or utilities (a score of 0). The private bureau ties regulations. distributes more than 2 years of historical data (a score of 1). To make the data comparable across countries, several as- The public registry collects data only on loans of $3,132 (66% sumptions about the business and the transaction are used. of income per capita) or more, but the private bureau collects information on loans of any value (a score of 1). Borrowers Assumptions about the business have the right to access their data (a score of 1). Summing The business (Buyer): across the indicators gives Turkey a total score of 5. • Is a publicly traded corporation listed on the country’s Public credit registry coverage most important stock exchange. If the number of publicly traded companies listed on that exchange is less than The public credit registry coverage indicator reports the 10, or if there is no stock exchange in the country, it number of individuals and firms listed in a public credit reg- is assumed that Buyer is a large private company with istry with current information on repayment history, unpaid multiple shareholders. debts or credit outstanding. The number is expressed as a • Has a board of directors and a chief executive officer percentage of the adult population. A public credit registry is (CEO) who may legally act on behalf of Buyer where defined as a database managed by the public sector, usually by permitted, even if this is not specifically required by law. the central bank or the superintendent of banks, that collects • Has only national shareholders. information on the creditworthiness of borrowers (persons • Has invested only in the country and has no subsidiaries or businesses) in the financial system and makes it available or operations abroad. to financial institutions. If no public registry operates, the • Is a food manufacturer. coverage value is 0. • Has its own distribution network. 36 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Assumptions about the transaction transaction Mr. James must disclose his conflict of interest to the other directors, but he is not required to provide specific • Mr. James is Buyer’s controlling shareholder and a member of Buyer’s board of directors. He owns 60% of Buyer and information about it (a score of 1). Country X does not require elected 2 directors to Buyer’s 5-member board. an external body to review the transaction (a score of 0). Add- • Mr. James also owns 90% of Seller, a company that ing these numbers gives Country X a score of 7 on the extent operates a chain of retail hardware stores. Seller recently of disclosure index. closed a large number of its stores. Extent of director liability index • Mr. James proposes to Buyer that it purchase Seller’s unused fleet of trucks to expand Buyer’s distribution of its The extent of director liability index measures (i) a shareholder food products. Buyer agrees. The price is equal to 10% of plaintiff ’s ability to hold Mr. James liable for damage the Buyer’s assets and is higher than the market value. Buyer-Seller transaction causes to the company (a score of 0 is • The proposed transaction is part of the company’s ordinary assigned if Mr. James cannot be held liable or can be held liable course of business and is not outside the authority of the only for fraud or bad faith; 1 if Mr. James can be held liable only company. if he influenced the approval of the transaction or was negli- • Buyer enters into the transaction. All required approvals gent; 2 if Mr. James can be held liable when the transaction was are obtained, and all required disclosures made. unfair or prejudicial to the other shareholders); (ii) a share- • The transaction is unfair to Buyer. Shareholders sue holder plaintiff ’s ability to hold the approving body (the CEO Mr. James and the other parties that approved the or board of directors) liable for damage the transaction causes transaction. to the company (a score of 0 is assigned if the approving body cannot be held liable or can be held liable only for fraud or bad Extent of disclosure index faith; 1 if the approving body can be held liable for negligence; The extent of disclosure index has 5 components: (i) what 2 if the approving body can be held liable when the transaction corporate body can provide legally sufficient approval for the is unfair or prejudicial to the other shareholders); (iii) whether transaction (a score of 0 is assigned if it is the CEO or the man- a court can void the transaction upon a successful claim by a aging director alone; 1 if the board of directors or shareholders shareholder plaintiff (a score of 0 is assigned if rescission is must vote and Mr. James is permitted to vote; 2 if the board unavailable or is available only in case of fraud or bad faith; 1 of directors must vote and Mr. James is not permitted to vote; if rescission is available when the transaction is oppressive or 3 if shareholders must vote and Mr. James is not permitted to prejudicial to the other shareholders; 2 if rescission is available vote); (ii) whether immediate disclosure of the transaction to when the transaction is unfair or entails a conflict of interest); the public, the shareholders or both is required (a score of 0 (iv) whether Mr. James pays damages for the harm caused is assigned if no disclosure is required; 1 if disclosure on the to the company upon a successful claim by the shareholder terms of the transaction but not Mr. James’s conflict of interest plaintiff (a score of 0 is assigned if no; 1 if yes); (v) whether is required; 2 if disclosure on both the terms and Mr. James’s Mr. James repays profits made from the transaction upon a conflict of interest is required); (iii) whether disclosure in the successful claim by the shareholder plaintiff (a score of 0 is as- annual report is required (a score of 0 is assigned if no dis- signed if no; 1 if yes); (vi) whether fines and imprisonment can closure on the transaction is required; 1 if disclosure on the be applied against Mr. James (a score of 0 is assigned if no; 1 terms of the transaction but not Mr. James’s conflict of interest if yes); and (vii) shareholder plaintiffs’ ability to sue directly or is required; 2 if disclosure on both the terms and Mr. James’s derivatively for damage the transaction causes to the company conflict of interest is required); (iv) whether disclosure by Mr. (a score of 0 is assigned if suits are unavailable or are available James to the board of directors is required (a score of 0 is as- only for shareholders holding more than 10% of the company’s signed if no disclosure is required; 1 if a general disclosure of share capital; 1 if direct or derivative suits are available for the existence of a conflict of interest is required without any shareholders holding 10% or less of share capital). specifics; 2 if full disclosure of all material facts relating to Mr. The index ranges from 0 to 10, with higher values indicating James’s interest in the Buyer-Seller transaction is required); and greater liability of directors. To hold Mr. James liable in Coun- (v) whether it is required that an external body, for example, an try Y, for example, a plaintiff must prove that Mr. James influ- external auditor, review the transaction before it takes place (a enced the approving body or acted negligently (a score of 1). To score of 0 is assigned if no; 1 if yes). hold the other directors liable, a plaintiff must prove that they The index ranges from 0 to 10, with higher values indicat- acted negligently (a score of 1). The unfair transaction cannot ing greater disclosure. In Country X, for example, the board be voided (a score of 0). If Mr. James is found liable, he must of directors must approve the transaction and Mr. James is pay damages (a score of 1) but he is not required to disgorge not allowed to vote (a score of 2). Buyer is required to disclose his profits (a score of 0). Mr. James cannot be fined or impris- immediately all information affecting the stock price, includ- oned (a score of 0). Direct suits are available for shareholders ing the conflict of interest (a score of 2). In its annual report holding 10% or less of share capital (a score of 1). Adding these Buyer must also disclose the terms of the transaction and Mr. numbers gives Country Y a score of 4 on the extent of director James’s ownership in Buyer and Seller (a score of 2). Before the liability index. DATA NOTES 37 Ease of shareholder suits index The ease of shareholder suits index measures (i) the range Paying taxes of documents available to the shareholder plaintiff from the defendant and witnesses during trial (a score of 1 is assigned Doing Business records the tax that a medium-size company for each of the following types of documents available: infor- must pay or withhold in a given year, as well as measures of mation that the defendant has indicated he intends to rely on the administrative burden in paying taxes. Taxes are measured for his defense; information that directly proves specific facts at all levels of government and include the profit or corporate in the plaintiff ’s claim; any information relevant to the subject income tax, social security contributions and labor taxes paid matter of the claim; and any information that may lead to the by the employer, property taxes, property transfer taxes, the discovery of relevant information); (ii) whether the plaintiff dividend tax, the capital gains tax, the financial transactions can directly examine the defendant and witnesses during trial tax, waste collection taxes and vehicle and road taxes. (a score of 0 is assigned if no; 1 if yes, with prior approval of To measure the tax paid by a standardized business and the questions by the judge; 2 if yes, without prior approval); the complexity of a country’s tax law, a case study is prepared (iii) whether the plaintiff can obtain any documents from the with a set of financial statements and assumptions about defendant without identifying them specifically (a score of 0 is transactions made over the year. Experts in each country assigned if no; 1 if yes); (iv) whether shareholders owning 10% compute the taxes owed in their jurisdiction based on the or less of the company’s share capital can request that a govern- standardized case facts. Information on the frequency of fil- ment inspector investigate the Buyer-Seller transaction (a score ing, audits and other costs of compliance is also compiled. of 0 is assigned if no; 1 if yes); (v) whether shareholders own- The project was developed and implemented in cooperation ing 10% or less of the company’s share capital have the right to with PricewaterhouseCoopers. inspect the transaction documents before filing suit (a score To make the data comparable across countries, several as- of 0 is assigned if no; 1 if yes); and (vi) whether the standard sumptions about the business and the taxes are used. of proof for civil suits is lower than that for a criminal case (a Assumptions about the business score of 0 is assigned if no; 1 if yes). The index ranges from 0 to 10, with higher values indicat- The business: ing greater powers of shareholders to challenge the transaction. • Is a limited liability, taxable company. If there is more than In Country Z, for example, the plaintiff can access documents one type of limited liability company in the country, the that the defendant intends to rely on for his defense and that limited liability form most popular among domestic firms is chosen. Incorporation lawyers or the statistical office directly prove facts in the plaintiff ’s claim (a score of 2). The report the most popular form. plaintiff can examine the defendant and witnesses during trial, • Started operations on January 1, 2004. At that time the though only with prior approval of the questions by the court company purchased all the assets shown in its balance (a score of 1). The plaintiff must specifically identify the docu- sheet and hired all its workers. ments being sought (for example, the Buyer-Seller purchase • Operates in the country’s most populous city. agreement of July 15, 2005) and cannot just request categories • Is 100% domestically owned and has 5 owners, all of (for example, all documents related to the transaction) (a score whom are natural persons. of 0). A shareholder holding 5% of Buyer’s shares can request • Has a start-up capital of 102 times income per capita at the that a government inspector review suspected mismanage- end of 2004. ment by Mr. James and the CEO (a score of 1). And any share- • Performs general industrial or commercial activities. holder can inspect the transaction documents before deciding Specifically, it produces ceramic flowerpots and sells them whether to sue (a score of 1). The standard of proof for civil at retail. It does not participate in foreign trade (no import suits is the same as that for criminal suits (a score of 0). Add- or export) and does not handle products subject to a ing these numbers gives Country Z a score of 5 on the ease of special tax regime, for example, liquor or tobacco. shareholder suits index. • Owns 2 plots of land, 1 building, machinery, office equipment, computers and 1 truck and leases another truck. Strength of investor protection index • Does not qualify for investment incentives or any special The strength of investor protection index is the average of the benefits apart from those related to the age or size of the extent of disclosure index, the extent of director liability index company. and the ease of shareholder suits index. The index ranges from 0 • Has 60 employees—4 managers, 8 assistants and 48 to 10, with higher values indicating better investor protection. workers. All are nationals, and 1 of the managers is also an owner. This methodology was developed by Simeon Djankov, Rafael • Has a turnover of 1,050 times income per capita. La Porta, Florencio López-de-Silanes and Andrei Shleifer in • Makes a loss in the first year of operation. “The Law and Economics of Self-Dealing.� Harvard University, • Has the same gross margin (pre-tax) across all Department of Economics, Cambridge, Mass. 2005. economies. 38 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES • Distributes 50% of its profits as dividends to the owners at value added tax) but not paid by the company are excluded. the end of the second year. The taxes included can be divided into five categories: profit • Sells one of its plots of land at a profit during the second or corporate income tax, social security contributions and year. other labor taxes paid by the employer, property taxes, turn- • Is subject to a series of detailed assumptions on expenses over taxes and other small taxes (such as municipal fees and and transactions to further standardize the case. vehicle and fuel taxes). Commercial profits are defined as sales minus cost of Assumptions about the taxes goods sold, minus gross salaries, minus administrative ex- • All the taxes paid or withheld in the second year of penses, minus other deductible expenses, minus deductible operation are recorded. A tax is considered distinct if it provisions, plus capital gains (from the property sale) minus has a different name or is collected by a different agency. interest expense, plus interest income and minus commer- Taxes with the same name and agency, but charged at cial depreciation. To compute the commercial depreciation, different rates depending on the business, are counted as a straight-line depreciation method is applied with the fol- the same tax. lowing rates: 0% for the land, 5% for the building, 10% for • The number of times the company pays or withholds the machinery, 33% for the computers, 20% for the office taxes in a year is the number of different taxes multiplied by the frequency of payment (or withholding) for equipment, 20% for the truck and 10% for business develop- each tax. The frequency of payment includes advance ment expenses. payments (or withholding) as well as regular payments The methodology is consistent with the total tax calcula- (or withholding). tion applied by PricewaterhouseCoopers. Tax payments This methodology was developed in “Tax Burdens around the The tax payments indicator reflects the total number of taxes World,� an ongoing research project by Simeon Djankov, Cara- paid, the method of payment, the frequency of payment and lee Mcliesh, Rita Ramalho and Andrei Shleifer. the number of agencies involved for this standardized case during the second year of operation. It includes payments made by the company on consumption taxes, such as sales Trading across borders tax or value added tax. These taxes are traditionally withheld on behalf of the consumer. The number of payments takes Doing Business compiles procedural requirements for ex- into account electronic filing. Where full electronic filing is porting and importing a standardized cargo of goods. Every allowed, the tax is counted as paid once a year even if the official procedure for exporting and importing the goods is payment is more frequent. recorded—from the contractual agreement between the two parties to the delivery of goods—along with the time and Time cost necessary for completion. All documents required for Time is recorded in hours per year. The indicator measures clearance of the goods across the border are also recorded. the time to prepare, file and pay (or withhold) three major For exporting goods, procedures range from packing the goods types of taxes: the corporate income tax, value added or sales at the factory to their departure from the port of exit. For import- tax and labor taxes, including payroll taxes and social security ing goods, procedures range from the vessel’s arrival at the port of contributions. Preparation time includes the time to collect all entry to the cargo’s delivery at the factory warehouse. information necessary to compute the tax payable. If separate Local freight forwarders, shipping lines, customs brokers accounting books must be kept for tax purposes—or separate and port officials provide information on required documents calculations must be made for tax purposes—the time associ- and cost as well as the time to complete each procedure. To ated with these processes is included. Filing time includes the make the data comparable across countries, several assump- time to complete all necessary tax forms and make all neces- tions about the business and the traded goods are used. sary calculations. Payment time is the hours needed to make the payment online or at the tax office. When taxes are paid Assumptions about the business in person, the time includes delays while waiting. The business: Total tax rate • Has 200 or more employees. The total tax rate measures the amount of taxes payable by • Is located in the country’s most populous city. the business in the second year of operation, expressed as a • Is a private, limited liability company. It does not operate share of commercial profits. Doing Business 2007 reports tax within an export processing zone or an industrial estate rates for fiscal year 2005. The total amount of taxes is the sum with special export or import privileges. of all the different taxes payable after accounting for deduc- • Is domestically owned with no foreign ownership. tions and exemptions. The taxes withheld (such as sales tax or • Exports more than 10% of its sales. DATA NOTES 39 Assumptions about the traded goods (and, in a quarter of the countries, by judges as well). The traded product travels in a dry-cargo, 20-foot, full con- Assumptions about the case tainer load. The product: • Is not hazardous nor does it include military items. • The value of the claim equals 200% of the country’s income per capita. • Does not require refrigeration or any other special environment. • The plaintiff has fully complied with the contract (that is, the plaintiff is 100% right). • Does not require any special phytosanitary or environmental safety standards other than accepted • The case represents a lawful transaction between businesses located in the country’s most populous city. international standards. • The plaintiff files a lawsuit to enforce the contract. • Falls under one of the following Standard International Trade Classification (SITC) Revision categories: • A court in the most populous city decides the dispute. SITC 65: textile yarn, fabrics and made-up articles. • The defendant attempts to delay service of process but it is finally accomplished. SITC 84: articles of apparel and clothing accessories. • The defendant opposes the complaint (default judgment SITC 07: coffee, tea, cocoa, spices and manufactures thereof. is not an option) on the grounds that the delivered goods were not of adequate quality. Documents All documents required to export and import the goods are • The plaintiff introduces documentary evidence and calls one witness. The defendant calls one witness. Neither recorded. It is assumed that the contract has already been party presents objections. agreed upon and signed by both parties. Documents include • The judgment is in favor of the plaintiff and the defendant bank documents, customs declaration and clearance docu- does not appeal the judgment. ments, port filing documents, import licenses and other of- ficial documents exchanged between the concerned parties. • The plaintiff takes all required steps for prompt enforcement of the judgment. The debt is successfully Documents filed simultaneously are considered different collected through sale of the defendant’s movable assets documents but with the same time frame for completion. (such as a vehicle) at a public auction. Time Procedures Time is recorded in calendar days. The time calculation for a procedure starts from the moment it is initiated and runs until A procedure is defined as any interaction mandated by law or it is completed. If a procedure can be accelerated for an addi- court regulation between the parties, or between them and tional cost, the fastest legal procedure is chosen. It is assumed the judge (or administrator) or court officer. This includes that neither the exporter nor the importer wastes time and steps to file the case, steps for trial and judgment and steps that each commits to completing each remaining procedure necessary to enforce the judgment. without delay. Procedures that can be completed in parallel Time are measured as simultaneous for the purpose of measuring time. The waiting time between procedures (for example, dur- Time is recorded in calendar days, counted from the moment ing unloading of the cargo) is included in the measure. the plaintiff files the lawsuit in court until payment. This includes both the days when actions take place and the wait- Cost ing periods between actions. The respondents make separate Cost is recorded as the fees levied on a 20-foot container in estimates of the average duration of different stages of dispute United States dollars. All the fees associated with completing resolution: the completion of service of process (time to file the procedures to export or import the goods are included. These the case), the issuance of judgment (time for the trial) and the include costs for documents, administrative fees for customs moment of payment (time for enforcement). clearance and technical control, terminal handling charges and inland transport. The cost measure does not include tariffs or Cost trade taxes. Only official costs are recorded. Cost is recorded as a percentage of the claim, assumed to be equivalent to 200% of income per capita. Only official costs re- quired by law are recorded, including court costs and average at- Enforcing contracts torney fees where the use of attorneys is mandatory or common. Indicators on enforcing contracts measure the efficiency of the This methodology was developed by Simeon Djankov, judicial system in resolving a commercial dispute. The data Rafael La Porta, Florencio López-de-Silanes and Andrei are built by following the step-by-step evolution of a payment Shleifer in “Courts.� Quarterly Journal of Economics 118 dispute before local courts. The data are collected through study of the codes of civil procedure and other court regula- (2): 453–517. 2003. tions as well as surveys completed by local litigation lawyers 40 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Time Closing a business Time is recorded in calendar years. It captures the estimated duration required to complete a bankruptcy. Information is Doing Business studies the time, cost and outcomes of bank- collected on the sequence of the bankruptcy procedures and ruptcy proceedings involving domestic entities. The data are on whether any procedures can be carried out simultane- derived from survey responses by local insolvency lawyers ously. Delays due to legal derailment tactics that parties to the and verified through a study of laws and regulations as well bankruptcy may use—in particular, the extension of response as public information on bankruptcy systems. periods or appeals—are considered. To make the data comparable across countries, several as- sumptions about the business and the case are used. Cost Assumptions about the business The cost of the bankruptcy proceedings is recorded as a percentage of the estate’s value. The cost is calculated on the The business: basis of survey responses by practicing insolvency lawyers. • Is a limited liability company. If several respondents report different estimates, the median • Operates in the country’s most populous city. reported value is used. Only official costs are recorded, in- • Is 100% domestically owned, with the founder, who is also cluding court costs as well as fees of insolvency practitioners, the chairman of the supervisory board, owning 51% (no independent assessors, lawyers and accountants. The cost other shareholder holds more than 5% of shares). figures are averages of the estimates on a multiple-choice • Has downtown real estate, where it runs a hotel, as its question, where the respondents choose among the follow- major asset. ing options: 0–2%, 3–5%, 6–8%, 9–10%, 11–18%, 19–25%, • Has a professional general manager. 26–33%, 34–50%, 51–75% and more than 75% of the estate • Has had average annual revenue of 1,000 times income value of the bankrupt business. per capita over the past 3 years. Recovery rate • Has 201 employees and 50 suppliers, each of whom is owed money for the last delivery. The recovery rate is recorded as cents on the dollar recovered • Borrowed from a domestic bank 5 years ago (the loan has by claimants—creditors, tax authorities and employees— 10 years to full repayment) and bought real estate (the through the bankruptcy proceedings. The calculation takes hotel building), using it as security for the bank loan. into account whether the business is kept as a going concern • Has observed the payment schedule and all other during the proceedings, as well as bankruptcy costs and the conditions of the loan up to now. loss in value due to the time spent closing down. If the busi- • Has a mortgage, with the value of the mortgage principal ness keeps operating, no value is lost on the initial claim, set being exactly equal to the market value of the hotel. at 100 cents on the dollar. If it does not, the initial 100 cents on the dollar are reduced to 70 cents on the dollar. Then the Assumptions about the case official costs of the insolvency procedure are deducted (1 cent • The business is experiencing liquidity problems. The for each percentage of the initial value). Finally, the value lost company’s loss in 2005 reduced its net worth to a negative as a result of the time that the money remains tied up in in- figure. There is no cash to pay the bank interest or solvency procedures is taken into account, including the loss principal in full, due tomorrow. Therefore, the business of value due to depreciation of the hotel furniture. Consistent defaults on its loan. Management believes that losses will with international accounting practice, the depreciation rate be incurred in 2007 and 2008 as well. for furniture is taken to be 20%. The furniture is assumed to • The bank holds a floating charge against the hotel in account for a quarter of the total value of assets. The recovery countries where floating charges are possible. If the law rate is the present value of the remaining proceeds, based does not permit a floating charge but contracts commonly use some other provision to that effect, this provision is on end-2005 lending rates from the International Monetary specified in the lending contract. Fund’s International Financial Statistics, supplemented with • The business has too many creditors to renegotiate out of data from central banks. court. It has the following options: a procedure aimed at rehabilitation or any procedure that will reorganize the This methodology was developed by Simeon Djankov, Oliver business to permit further operation; a procedure aimed Hart, Caralee McLiesh and Andrei Shleifer in “Efficiency in at liquidation; or a procedure aimed at selling the hotel, Bankruptcy,� Harvard University, Department of Economics, as a going concern or piecemeal, enforced either through Cambridge, Mass. 2006. court (or by a government authority like a debt collection agency) or out of court (receivership). DATA NOTES 41 one place to start in further improving business conditions Ease of doing business in Iceland. Across all 175 economies the average correlation coefficient between the 10 sets of indicators is 0.39, and the The ease of doing business index ranks economies from 1 to coefficients between any 2 sets of indicators range from 0.16 175. The index is calculated as the ranking on the simple av- (between employing workers and trading across borders) to erage of country percentile rankings on each of the 10 topics 0.66 (between closing a business and enforcing contracts). covered in Doing Business 2007. The ranking on each topic is The low correlations suggest that countries rarely score uni- the simple average of the percentile rankings on its compo- versally well or universally badly on the indicators. In other nent indicators (table 12.1). words, there is much room for partial reform. One example: The ranking on starting a business is the When an economy has no laws or regulations covering average of the country percentile rankings on the procedures, a specific area—for example bankruptcy—it receives a "no time, cost and paid-in minimum capital requirement to reg- practice" mark. Similarly, if regulation exists but is never ister a business. In Iceland it takes 5 procedures, 5 days and used in practice, or if a competing regulation prohibits such 3% of annual income per capita in fees to open a business. practice, the economy receives a "no practice" mark. This puts The minimum capital required amounts to 16% of income it at the bottom of the ranking. per capita. On these 4 indicators Iceland ranks in the 7th, 1st, The ease of doing business index is limited in scope. It 8th and 48th percentiles. So on average, Iceland ranks in the does not account for a country’s proximity to large markets, 18th percentile on the ease of starting a business. It ranks in the quality of its infrastructure services (other than services the 55th percentile on protecting investors, 18th percentile related to trading across borders), the security of property on trading across borders, 10th percentile on enforcing con- from theft and looting, macroeconomic conditions or the tracts, 7th percentile on closing a business and so on. Higher strength of underlying institutions. There remains a large un- ranks indicate simpler regulation and stronger protections finished agenda for research into what regulation constitutes of property rights. The simple average of Iceland’s percentile binding constraints, what package of reforms is most effective rankings on all topics is 20%. When all countries are ordered and how these issues are shaped by the country context. The by their average percentile rank, Iceland is in 12th place. Doing Business indicators provide a new empirical data set Each indicator set studies a different aspect of the busi- that may improve understanding of these issues. ness environment. Country rankings vary, sometimes sig- nificantly, across indicator sets. For example, Iceland ranks in the 7th percentile on closing a business, its highest ranking, This methodology was developed in “Regulation and Growth,� and in the 55th percentile on protecting investors, its lowest. by Simeon Djankov, Caralee McLiesh and Rita Ramalho. This points to priorities for reform: Protecting investors is Forthcoming in Economics Letters. TABLE 12.1 Which indicators make up the ranking? Starting a business Protecting investors Procedures, time, cost and paid-in minimum capital to open a new business Indices of the extent of disclosure, extent of director liability and ease of shareholder suits Dealing with licenses Procedures, time and cost of business inspections and licensing (construc- Paying taxes tion industry) Number of tax payments, time to prepare tax returns and total taxes as a share of commercial profits Employing workers Difficulty of hiring index, rigidity of hours index, difficulty of firing index and Trading across borders firing cost Documents, time and cost to export and import Registering property Enforcing contracts Procedures, time and cost to register commercial real estate Procedures, time and cost to resolve a commercial dispute Getting credit Closing a business Strength of legal rights index, depth of credit information index Recovery rate in bankruptcy 42 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Doing business indicators Indicator table Country tables INDICATOR TABLE 43 St. Vincent Small Antigua and St. Kitts and the states World Barbuda Dominica Grenada and Nevis St. Lucia Grenadines average average GNI per capita (US$) 10,920 3,790 3,920 8,210 4,800 3,590 4,800 7,853 Ease of doing business (global rank) 33 72 73 85 27 44 84 88 Ease of doing business (OECS rank) 2 4 5 6 1 3 – – STARTING A BUSINESS (global rank) 22 24 50 105 43 29 80 88 Procedures (number) 7 5 4 8 6 8 9 9 Time (days) 21 19 52 47 40 12 67 48 Cost (% of income per capita) 12.5 30.0 37.2 26.7 25.9 33.8 65.0 68 Minimum capital (% of income per capita) 0.0 0.0 0.0 45.4 0.0 0.0 73.7 150.8 DEALING WITH LICENSES (global rank) 15 34 12 7 10 1 59 88 Procedures (number) 12 11 8 14 9 11 15 18 Time (days) 139 195 142 72 139 74 157 205 Cost (% of income per capita) 27.8 16.8 36.4 15.2 34.9 10.6 450.0 506.4 EMPLOYING WORKERS (global rank) 40 50 34 35 29 48 66 88 Difficulty of hiring index (0-100) 11 11 44 0 0 11 25 34 Rigidity of hours index (0-100) 0 20 20 20 20 20 30 42 Difficulty of firing index (0-100) 20 20 0 20 20 20 26 33 Rigidity of employment index (0-100) 10 17 21 13 13 17 27 37 Nonwage labor cost (% of salary) 9 7 5 10 5 4 8 16 Firing cost (weeks of salary) 52 58 29 60 56 54 45 51 REGISTERING PROPERTY (global rank) 71 78 145 136 51 101 105 88 Procedures (number) 5 4 8 6 5 6 6 6 Time (days) 26 40 77 81 20 37 101 86 Cost (% of property value) 13.0 13.0 7.6 13.3 7.3 11.9 8.2 6.7 GETTING CREDIT (global rank) 101 101 83 117 101 83 101 88 Strength of legal rights index (0-10) 6 6 7 5 6 7 5 5 Depth of credit information index (0-6) 0 0 0 0 0 0 1 3 Public registry coverage index (% of adults) 0.0 0.0 0.0 0.0 0.0 0.0 0.7 3.8 Private bureau coverage index (% of adults) 0.0 0.0 0.0 0.0 0.0 0.0 7.5 17.4 PROTECTING INVESTORS (global rank) 19 19 19 19 19 19 84 88 Extent of disclosure index (0-10) 4 4 4 4 4 4 4 5 Extent of director liability index (0-10) 8 8 8 8 8 8 5 5 Ease of shareholder suits index (0-10) 7 7 7 7 7 7 6 6 Strength of investor protection index (0-10) 6.3 6.3 6.3 6.3 6.3 6.3 4.9 5 PAYING TAXES (global rank) 145 20 45 116 9 32 63 88 Payments (number) 44 30 30 23 16 21 29 36 Time (hours per year) 528 65 140 368 41 208 198 332 Total tax rate (% of profit) 48.5 34.8 42.8 52.7 31.5 33.6 48.3 53.8 TRADING ACROSS BORDERS (global rank) 47 97 84 37 45 48 63 88 Documents to export (number) 5 7 6 8 5 7 7 7 Time to export (days) 13 11 19 11 9 15 20 28 Cost to export (US$ per container) 1,056 1,477 858 706 1,053 756 1,237 1,196 Documents to import (number) 6 13 6 8 8 6 9 10 Time to import (days) 15 17 20 13 19 13 23 34 Cost to import (US$ per container) 1,467 1,512 984 756 1,163 1,354 1,395 1,413 ENFORCING A CONTRACT (global rank) 47 159 143 135 160 125 108 88 Procedures (number) 48 52 50 49 51 52 38 35 Time (days) 297 681 583 578 635 394 630 541 Cost (% of debt) 10.7 28.2 22.1 17.1 31.2 22.2 32.7 28.7 CLOSING A BUSINESS (global rank) 54 151 151 151 39 151 103 88 Time (years) 3 NO PRACTICE NO PRACTICE NO PRACTICE 2 NO PRACTICE 3 3 Cost (% of estate) 1 NO PRACTICE NO PRACTICE NO PRACTICE 9 NO PRACTICE 21 16 Recovery rate (cents on the dollar) 37 NO PRACTICE NO PRACTICE NO PRACTICE 42 NO PRACTICE 22 30.6 44 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES ANTIGUA AND BARBUDA Latin America & Caribbean GNI per capita (US$) 10,920 Ease of doing business (rank) 33 High income Population (m) 0.1 Starting a business (rank) 22 Registering property (rank) 71 Trading across borders (rank) 47 Procedures (number) 7 Procedures (number) 5 Documents to export (number) 5 Time (days) 21 Time (days) 26 Time to export (days) 13 Cost (% of income per capita) 12.5 Cost (% of property value) 13.0 Cost to export (US$ per container) 1,056 Minimum capital (% of income per capita) 0.0 Documents to import (number) 6 Getting credit (rank) 101 Time to import (days) 15 Dealing with licenses (rank) 15 Strength of legal rights index (0–10) 6 Cost to import (US$ per container) 1,467 Procedures (number) 12 Depth of credit information index (0–6) 0 Time (days) 139 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 47 Cost (% of income per capita) 27.8 Private bureau coverage (% of adults) 0.0 Procedures (number) 48 Time (days) 297 Employing workers (rank) 40 Protecting investors (rank) 19 Cost (% of claim) 10.7 Difficulty of hiring index (0–100) 11 Extent of disclosure index (0–10) 4 Rigidity of hours index (0–100) 0 Extent of director liability index (0–10) 8 Closing a business (rank) 54 Difficulty of firing index (0–100) 20 Ease of shareholder suits index (0–10) 7 Time (years) 3.0 Rigidity of employment index (0–100) 10 Strength of investor protection index (0–10) 6.3 Cost (% of estate) 1 Nonwage labor cost (% of salary) 9 Recovery rate (cents on the dollar) 37.3 Firing cost (weeks of salary) 52 Paying taxes (rank) 145 Payments (number per year) 44 Time (hours per year) 528 Total tax rate (% of profit) 48.5 DOMINICA Latin America & Caribbean GNI per capita (US$) 3,790 Ease of doing business (rank) 72 Upper middle income Population (m) 0.1 Starting a business (rank) 24 Registering property (rank) 78 Trading across borders (rank) 97 Procedures (number) 5 Procedures (number) 4 Documents to export (number) 7 Time (days) 19 Time (days) 40 Time to export (days) 11 Cost (% of income per capita) 30.0 Cost (% of property value) 13.0 Cost to export (US$ per container) 1,477 Minimum capital (% of income per capita) 0.0 Documents to import (number) 13 Getting credit (rank) 101 Time to import (days) 17 Dealing with licenses (rank) 34 Strength of legal rights index (0–10) 6 Cost to import (US$ per container) 1,512 Procedures (number) 11 Depth of credit information index (0–6) 0 Time (days) 195 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 159 Cost (% of income per capita) 16.8 Private bureau coverage (% of adults) 0.0 Procedures (number) 52 Time (days) 681 Employing workers (rank) 50 Protecting investors (rank) 19 Cost (% of claim) 28.2 Difficulty of hiring index (0–100) 11 Extent of disclosure index (0–10) 4 Rigidity of hours index (0–100) 20 Extent of director liability index (0–10) 8 Closing a business (rank) 151 Difficulty of firing index (0–100) 20 Ease of shareholder suits index (0–10) 7 Time (years) NO PRACTICE Rigidity of employment index (0–100) 17 Strength of investor protection index (0–10) 6.3 Cost (% of estate) NO PRACTICE Nonwage labor cost (% of salary) 7 Recovery rate (cents on the dollar) 0.0 Firing cost (weeks of salary) 58 Paying taxes (rank) 20 Payments (number per year) 30 Time (hours per year) 65 Total tax rate (% of profit) 34.8 GRENADA Latin America & Caribbean GNI per capita (US$) 3,920 Ease of doing business (rank) 73 Upper middle income Population (m) 0.1 Starting a business (rank) 50 Registering property (rank) 145 Trading across borders (rank) 84 Procedures (number) 4 Procedures (number) 8 Documents to export (number) 6 Time (days) 52 Time (days) 77 Time to export (days) 19 Cost (% of income per capita) 37.2 Cost (% of property value) 7.6 Cost to export (US$ per container) 858 Minimum capital (% of income per capita) 0.0 Documents to import (number) 6 Getting credit (rank) 83 Time to import (days) 20 Dealing with licenses (rank) 12 Strength of legal rights index (0–10) 7 Cost to import (US$ per container) 984 Procedures (number) 8 Depth of credit information index (0–6) 0 Time (days) 142 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 143 Cost (% of income per capita) 36.4 Private bureau coverage (% of adults) 0.0 Procedures (number) 50 Time (days) 583 Employing workers (rank) 34 Protecting investors (rank) 19 Cost (% of claim) 22.1 Difficulty of hiring index (0–100) 44 Extent of disclosure index (0–10) 4 Rigidity of hours index (0–100) 20 Extent of director liability index (0–10) 8 Closing a business (rank) 151 Difficulty of firing index (0–100) 0 Ease of shareholder suits index (0–10) 7 Time (years) NO PRACTICE Rigidity of employment index (0–100) 21 Strength of investor protection index (0–10) 6.3 Cost (% of estate) NO PRACTICE Nonwage labor cost (% of salary) 5 Recovery rate (cents on the dollar) 0.0 Firing cost (weeks of salary) 29 Paying taxes (rank) 45 Payments (number per year) 30 Time (hours per year) 140 Total tax rate (% of profit) 42.8 COUNTRY TABLES 45 ST. KITTS AND NEVIS Latin America & Caribbean GNI per capita (US$) 8,210 Ease of doing business (rank) 85 Upper middle income Population (m) 0.1 Starting a business (rank) 105 Registering property (rank) 136 Trading across borders (rank) 37 Procedures (number) 8 Procedures (number) 6 Documents to export (number) 8 Time (days) 47 Time (days) 81 Time to export (days) 11 Cost (% of income per capita) 26.7 Cost (% of property value) 13.3 Cost to export (US$ per container) 706 Minimum capital (% of income per capita) 45.4 Documents to import (number) 8 Getting credit (rank) 117 Time to import (days) 13 Dealing with licenses (rank) 7 Strength of legal rights index (0–10) 5 Cost to import (US$ per container) 756 Procedures (number) 14 Depth of credit information index (0–6) 0 Time (days) 72 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 135 Cost (% of income per capita) 15.2 Private bureau coverage (% of adults) 0.0 Procedures (number) 49 Time (days) 578 Employing workers (rank) 35 Protecting investors (rank) 19 Cost (% of claim) 17.1 Difficulty of hiring index (0–100) 0 Extent of disclosure index (0–10) 4 Rigidity of hours index (0–100) 20 Extent of director liability index (0–10) 8 Closing a business (rank) 151 Difficulty of firing index (0–100) 20 Ease of shareholder suits index (0–10) 7 Time (years) NO PRACTICE Rigidity of employment index (0–100) 13 Strength of investor protection index (0–10) 6.3 Cost (% of estate) NO PRACTICE Nonwage labor cost (% of salary) 10 Recovery rate (cents on the dollar) 0.0 Firing cost (weeks of salary) 60 Paying taxes (rank) 116 Payments (number per year) 23 Time (hours per year) 368 Total tax rate (% of profit) 52.7 ST. LUCIA Latin America & Caribbean GNI per capita (US$) 4,800 Ease of doing business (rank) 27 Upper middle income Population (m) 0.2 Starting a business (rank) 43 Registering property (rank) 51 Trading across borders (rank) 45 Procedures (number) 6 Procedures (number) 5 Documents to export (number) 5 Time (days) 40 Time (days) 20 Time to export (days) 9 Cost (% of income per capita) 25.9 Cost (% of property value) 7.3 Cost to export (US$ per container) 1,053 Minimum capital (% of income per capita) 0.0 Documents to import (number) 8 Getting credit (rank) 101 Time to import (days) 19 Dealing with licenses (rank) 10 Strength of legal rights index (0–10) 6 Cost to import (US$ per container) 1,163 Procedures (number) 9 Depth of credit information index (0–6) 0 Time (days) 139 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 160 Cost (% of income per capita) 34.9 Private bureau coverage (% of adults) 0.0 Procedures (number) 51 Time (days) 635 Employing workers (rank) 29 Protecting investors (rank) 19 Cost (% of claim) 31.2 Difficulty of hiring index (0–100) 0 Extent of disclosure index (0–10) 4 Rigidity of hours index (0–100) 20 Extent of director liability index (0–10) 8 Closing a business (rank) 39 Difficulty of firing index (0–100) 20 Ease of shareholder suits index (0–10) 7 Time (years) 2.0 Rigidity of employment index (0–100) 13 Strength of investor protection index (0–10) 6.3 Cost (% of estate) 9 Nonwage labor cost (% of salary) 5 Recovery rate (cents on the dollar) 42.2 Firing cost (weeks of salary) 56 Paying taxes (rank) 9 Payments (number per year) 16 Time (hours per year) 41 Total tax rate (% of profit) 31.5 ST. VINCENT AND THE GRENADINES Latin America & Caribbean GNI per capita (US$) 3,590 Ease of doing business (rank) 44 Upper middle income Population (m) 0.1 Starting a business (rank) 29 Registering property (rank) 101 Trading across borders (rank) 48 Procedures (number) 8 Procedures (number) 6 Documents to export (number) 7 Time (days) 12 Time (days) 37 Time to export (days) 15 Cost (% of income per capita) 33.8 Cost (% of property value) 11.9 Cost to export (US$ per container) 756 Minimum capital (% of income per capita) 0.0 Documents to import (number) 6 Getting credit (rank) 83 Time to import (days) 13 Dealing with licenses (rank) 1 Strength of legal rights index (0–10) 7 Cost to import (US$ per container) 1,354 Procedures (number) 11 Depth of credit information index (0–6) 0 Time (days) 74 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 125 Cost (% of income per capita) 10.6 Private bureau coverage (% of adults) 0.0 Procedures (number) 52 Time (days) 394 Employing workers (rank) 48 Protecting investors (rank) 19 Cost (% of claim) 22.2 Difficulty of hiring index (0–100) 11 Extent of disclosure index (0–10) 4 Rigidity of hours index (0–100) 20 Extent of director liability index (0–10) 8 Closing a business (rank) 151 Difficulty of firing index (0–100) 20 Ease of shareholder suits index (0–10) 7 Time (years) NO PRACTICE Rigidity of employment index (0–100) 17 Strength of investor protection index (0–10) 6.3 Cost (% of estate) NO PRACTICE Nonwage labor cost (% of salary) 4 Recovery rate (cents on the dollar) 0.0 Firing cost (weeks of salary) 54 Paying taxes (rank) 32 Payments (number per year) 21 Time (hours per year) 208 Total tax rate (% of profit) 33.6 46 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Case studies Starting a business Dealing with licenses Registering property CASE STUDIES 47 STARTING A BUSINESS Antigua and Barbuda Dominica Standard company legal form: Private Limited Liability Company Standard company legal form: Private Limited Liability Company City: Saint John’s City: Roseau Minimum capital requirement: N/A Minimum capital requirement: N/A Procedure 1: Search and reserve company name Procedure 1. Search for a company name and reserve the Time to complete: 1 day proposed name Cost to complete: EC$25 Time to complete: 7 days Comments: The company name search is done manually by going through Cost to complete: EC$25 large registration books. Once the person is sure that no other company has Comments: In practice, companies seldom search for the company name. The their proposed name, a form is submitted. This form serves as a name reserva- lawyer often simply fills out the registration form with the name of choice and if tion for 3 months. there is a conflict at the registry, the Registrar will send back the application. Procedure 2: Lawyer prepares incorporation documents Procedure 2. Lawyer verifies affidavit Time to complete: 1 day Time to complete: 2 days Cost to complete: EC$150 Cost to complete: EC$2,125 Comments: Cost pertains to the fee charged by a lawyer or justice of peace Comments: Documents required for incorporation: Articles of Incorporation, to prepare a declaration swearing that the company owner is not bankrupt, Notice of Address and Notice of Directors. Bylaws are also required by the is mentally sound and over 18 years of age. This is the only document which Company’s Act, but can be created later. Companies need to produce an affidavit requires an attorney’s intervention by law. However, the general practice is that saying persons incorporating the company are not bankrupt or mentally incom- an attorney will prepare all incorporation documents: Notice of Address, Notice petent. The documents as well as affidavit are prepared by an attorney. of Directors and Articles of Incorporation. In this case the average attorney fee is EC$2,500. All the necessary documents are forms from the Company Act and are Procedure 3. Registration with the Commercial Registry completed by filling in blanks. Time to complete: 2 days Procedure 3: Registration with the Commercial Registry (receive Cost to complete: EC$750 certificate of incorporation) Comments: Company receives Certificate of Incorporation Time to complete: 10 days Procedure 4. Apply for tax payer identification number (register Cost to complete: EC$3,000 (legal fees for incorporation) + EC$200 (incorpora- the company for tax) tion certificate) Comments: The annual return is filed at the companies’ registry with the direc- Time to complete: 7 days tors’ names, shares issued, address and type of business activities. Cost to complete: no charge Comments: Registers company with Inland Revenue Department. *Procedure 4: Make a company seal Procedure 5. Register as employer with social security institute Time to complete: 7 days Cost to complete: EC$200 Time to complete: 1 day Comments: Company seals are not required by the Company Act, but are in Cost to complete: no charge practice required for everyday transactions of the company. The cost varies Comments: The employer registers as such and receives a social security between EC$150 and EC$250. employer number. He also verifies the social security cards of each employee at the time of employment. *Procedure 5: Apply for tax payer identification number (register the company for tax) and education levy Time to complete: 3 days Grenada Cost to complete: no charge Standard company legal form: Private Limited Liability Company Comments: Both the tax payer identification number and the registration for City: Saint George’s the education levy take place at the Inland Revenue Authority. Minimum capital requirement: N/A Procedure 6: Register for medical benefit Procedure 1. Search and reserve company name Time to complete: 1 day Time to complete: 3 days Cost to complete: no charge Cost to complete: EC$10 Comments: The amount charged is the submission fee to the registrar Procedure 7: Register for social security Time to complete: 1 day Procedure 2. Prepare and notarize company statutes Cost to complete: no charge Time to complete: 2 days Cost to complete: EC$2,500 * Procedures 4 & 5 can occur simultaneously. Comments: The business registration application includes: Articles of Incorpora- tion, Notice of Address, Notice of Directors and Request for Company Name Search. 48 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES STARTING A BUSINESS *Procedure 3. Register with the Supreme Court Registry and Time to complete: 10 days receive company certificate Cost to complete: EC$50 Time to complete: 47 days Comments: The company can choose between a company stamp or a company seal (they serve the same purpose) However, since company seals have to be Cost to complete: EC$1,200 ordered from oversees it is more costly and takes more time to acquire a seal Comments: Statement of particulars is submitted to the Supreme Court Regis- than it is to purchase a stamp. try for processing. Applicant must file a statutory declaration with the Registry indicating that all particulars in the statement are true. The Registrar issues the *Procedure 7: Obtain business license and tax identification company certificate in 8 days. The Registrar informs the tax authority (Internal Revenue Department) about number newly formed companies so they are registered for General Consumption Tax Time to complete: 35 days (simultaneous with Procedure 6) (45 days). Cost to complete: EC$2,000 The National Insurance Scheme (NIS) contacts the registrar on a monthly basis Comments: The Ministry of Finance issues the business license and notifies the and provides the firm with its corresponding NIS number, which the registrar Inland Revenue Department to issue the company a tax number. mails to the firm owner (30 days). *Procedure 8: Register firm as an employer with the Social *Procedure 4. Make company seal Security Office Time to complete: 2 days Time to complete: 21 days Cost to complete: EC$75 Cost to complete: no charge * Procedures 3 & 4 can occur simultaneously. * Procedures 6–8 can occur simultaneously. St. Kitts and Nevis St. Lucia Standard company legal form: Private Limited Liability Company Standard company legal form: Private Limited Liability Company City: Basseterre City: Castries Minimum capital requirement: EC$10,000 Minimum capital requirement: N/A Procedure 1: Deposit required amount in a bank and obtain Procedure 1. Search for a company name and reserve the deposit evidence proposed name Time to complete: 1 day Time to complete: 2 days Cost to complete: no charge Cost to complete: EC$25 Comments: The required deposit is a minimum of EC$4,000. Comments: In practice, companies seldom search for the company name. The lawyer often simply fills out the registration form with the name of choice and if Procedure 2: Search and reserve company name there is a conflict at the registry, the Registrar will return the application. A name Time to complete: 1 day can be reserved for a three-month period. Cost to complete: EC$5 Procedure 2. Lawyer prepares incorporation documents Procedure 3: Prepare and notarize company statutes Time to complete: 1 day Time to complete: 1 day Cost to complete: EC$2,325 Cost to complete: EC$2,500 (lawyer’s fees) + EC$150 (notarization cost) Comments: An attorney prepares incorporation documents: Articles of Incor- Comments: An attorney is needed to prepare incorporation documents and an poration, Notice of Directors, Notice of Registered Office of the Company and a affidavit. Notarization costs are separate from attorney costs; the notarization fee notarized declaration swearing that the company owner is mentally sound and is EC$25 per document. over 18 years of age. Bylaws are not essential for the formation of the company but are highly recommended and these are usually filed together with the docu- Procedure 4: Procurement of directors’ criminal record ments mentioned above and are included in the formation price. Time to complete: 1 day Procedure 3. Registration with the Commercial Registry Cost to complete: EC$375 Time to complete: 30 days Comments: The fee refers to notarization costs, since the documents can be pre- pared by the applicants themselves, not necessarily an attorney. Notarization fee Cost to complete: EC$850 is EC$25 per document; and 3 documents are required per director. Comments: The cost refers to the administrative fee paid at the Commercial Registry when the company documents are presented for registration. The Procedure 5: Register with Commercial Registry and obtain Registry issues a Certification of Incorporation once the registration process is finalized. Certificate of Incorporation Time to complete: 7 days *Procedure 4. Make company seal Cost to complete: EC$770 Time to complete: 7 days Comments: There is an annual renewal fee of EC$25 required per document Cost to complete: EC$75 (i.e., change of directors, change of address, etc.) Comments: A company can obtain a seal locally in the form of a rubber stamp within seven days. If a more formal embossed seal is required, it can be obtained *Procedure 6: Purchase company stamp from overseas in a 14 day period at a cost of approximately EC$260. CASE STUDIES 49 STARTING A BUSINESS *Procedure 5. Obtain tax payer identification number Procedure 4. Make rubber seal Time to complete: 1 day Time to complete: 1 days Cost to complete: no charge Cost to complete: EC$145 Comments: The responsible authority is the Inland Revenue Department Comments: The company seal must be affixed to the Bylaws before filing. *Procedure 6. Register as employer with Social Security Institute Procedure 5. File Bylaws and Notice of Appointment of Secretary Time to complete: 1 day Time to complete: 2 days Cost to complete: no charge Cost to complete: EC$150 Comments: The responsible authority is the National Insurance Corporation Comments: When the applicant retrieves the Certificate of Incorporation he files (NIC) 2 copies of the Bylaws and the Notice of Appointment of Secretary. Two days later he retrieves a registered copy. * Procedures 4–6 can occur simultaneously. Procedure 6. Apply for a trade/industrial license St. Vincent and the Grenadines Time to complete: 2 days Standard company legal form: Private Limited Liability Company Cost to complete: EC$100 City: Kingstown Comments: Applies to all businesses conducting commercial or industrial activities. Governmental officials do not inspect the company before issuing the Minimum capital requirement: N/A license. The reported cost is an average since license fees depend on the type and the amount of stock for each company. Procedure 1. Search and reserve company name Time to complete: 2 days Procedure 7. Enroll for income tax Cost to complete: EC$2 Time to complete: 1 day Comments: The applicant searches the index of companies at the Commerce Cost to complete: no charge and Intellectual Property Office and verifies that the proposed name is available. Comments: The Registrar notifies the Inland Revenue Department once the company is incorporated and the company must then register at their office. Procedure 2. Obtain and legalize the incorporation documents Time to complete: 1 day Procedure 8. Enroll company and workers at the National Cost to complete: EC$1,750 Insurance Services Comments: The documents are prescribed forms from the Company Registra- Time to complete: 1 day tion Act of 1996 and amendments thereto. The lawyers’ fees are for procurement Cost to complete: no charge of documents. Owners seldom prepare their own forms. In all cases, the docu- ments must be signed by an attorney. Comments: The company submits a form with their information as well as a form for every worker hired. The contribution to National Insurance Services (NIS) is based on each employee’s salary. Procedure 3. Registration with the Commercial Registry Time to complete: 2 days Cost to complete: EC$950 Comments: The cost represents the initial administrative fee. The required documents are: Article of Incorporation, Notice of Directors, Notice of Registered Office, request for name search and name reservation, lawyer’s declaration and a cover letter in the event one of the directors does not have a middle name (a middle initial is required in the forms). After 2 days, if all documents are in order, the Registry releases a Certificate of Incorporation. 50 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES DEALING WITH LICENSES Antigua and Barbuda Procedure 8. Apply for water connection Data as of: March 2006 Time to complete: 1 day (simultaneous with Procedure 7) City: St. Johns Cost to complete: EC$10 Comments: No inspection by the water department is required. Procedure 1. Obtain �approval in principle� Agency: Antigua Power Utilities Authority Time to complete: 21 days (2 weeks—1 month) Procedure 9. Obtain electricity connection Cost to complete: EC$65 Comments: Although this procedure is not required by law, it is done in practice Time to complete: 14 days to ensure that area residents will not object to the structure. Cost to complete: EC$200 for installation Agency: Development Control Authority Agency: Antigua Power Utilities Authority Procedure 2. Obtain project clearance from Fire Department Procedure 10. Obtain water connection Time to complete: 14 days Time to complete: 30 days (simultaneous with Procedure 9) Cost to complete: free of charge Cost to complete: EC$450 (usually between EC$350 and 600) Agency: Fire Department Agency: Water and Sewage Company, Antigua Power Utilities Authority Procedure 3. Obtain project clearance from Environmental Procedure 11. Obtain fixed telephone line Department Time to complete: 14 days Time to complete: 14 days Cost to complete: EC$185 Cost to complete: free of charge Agency: Antigua Power Utilities Authority Agency: Environmental Department Dominica Procedure 4. Obtain approval permit from Municipal Authority Data as of: March 2006 Time to complete: 35 days (4-6 weeks) City: Roseau Cost to complete: EC$7035 (EC$35 for forms + EC$0.50 per sq. ft) Comments: The architect must submit all drawings, a 3-page application and Procedure 1. Apply for an environmental impact assessment proof of ownership such as a title deed. This procedure also includes approval of (EIA) the sewage connection. Time to complete: 1-3 months Agency: Municipality Cost to complete: EC$100 Procedure 5. Obtain approval from the Development Control Comments: Prepared by an independent consultant, must be approved by the Government Development & Planning Corporation (D&PC). Authority Board Time to complete: 21 days (2—4 weeks) Procedure 2. Apply for outline planning permission Cost to complete: included in previous procedure Time to complete: 4 months, simultaneous to procedure 1. Comments: This procedure is only required for commercial buildings. Approval Cost to complete: EC$1,000 is at the discretion of the director of the board. Agency: D&PC Agency: Development Control Authority Procedure 3. Resubmit plans to the D&PC after incorporating Procedure 6. Inspection by the Development Control Authority changes suggested by the EIA Time to complete: 1 day Time to complete: included in the previous procedure Cost to complete: free of charge Cost to complete: included in the previous procedure Comments: The law requires 10 inspections to take place at various stages of construction. In practice however, all 10 inspections rarely take place. Contractors Comments: There are always changes needed. often have to provide transport to the inspectors for them to come to the site. Agency: Development Control Authority Procedure 4. Install temporary water and sewage utilities Time to complete: 10 days (1-2 weeks) Procedure 7. Inspection by the Electrical Department Cost to complete: EC$300 deposit Time to complete: 7 days Agency: Dominica Water and Sewage Company (DOWASCO) Cost to complete: EC$10 Comments: The Electrical Department inspects circuits and network connectivity. Procedure 5. Inspection Agency: Antigua Power Utilities Authority Time to complete: 2 days Cost to complete: no charge Procedure 7. Apply for electrical connection Comments: According to the building code, nine inspections should be con- Time to complete: 1 day ducted during the process of building. However, only three happen in practice. There are no fees for the inspections. Each comes within 48 hours of being Cost to complete: EC$10 called by contractor for review. Comments: Builders must present the Electrical Inspection Certificate along with the application form. Procedure 6. Inspection of substructure (foundation) prepared Agency: Antigua Power Utilities Authority Time to complete: 2 days Cost to complete: no charge CASE STUDIES 51 DEALING WITH LICENSES Procedure 7. Inspection of framing for roof Procedure 4. Obtain temporary electric connection Time to complete: 1 day Time to complete: 14 days (2 weeks) Cost to complete: no charge Cost to complete: EC$170 Agency: Grenlick (electricity company) Procedure 8. Inspection and testing of electrical system Time to complete: 7 days Procedure 5. Obtain electric inspection certificate Cost to complete: free of charge Time to complete: 7 days (1 week) Comments: Conducted by Electrical Division. Certificate is received if inspection Cost to complete: EC$5 is passed. Agency: Ministry of Works Procedure 9. Installation of electrical lines Procedure 6. Install electrical power Time to complete: 45 days (1-2 months) Time to complete: 35 days (1 week –2 months) Cost to complete: EC$70.2 ( EC$2.14/ft of cable) + EC$2000 (refundable Cost to complete: EC$150 deposit) Agency: Ministry of Public Works Comments: Official Requirements: • Where line extension is required, the customer must give the company much Procedure 7. Obtain water and sewage connection advance notice • Customer must provide load requirements; voltage(s) and watts Time to complete: 7 days–simultaneous with Procedure 6 • Customer must provide an approve certification of the installation from the Cost to complete: EC$120 Government Electrical Division Comments: In St. George’s, most buildings connect to the sewerage system. • Customer pays a contribution towards the connection of power supply. Outside of St. George’s, septic tanks are used. Agency: Dominica Electricity Service LTD Agency: National Water and Sewage Authority (NAWASA) Procedure 10. Convert temporary water and sewage into Procedure 8. Install fixed telephone line permanent utility Time to complete: 7 days–simultaneous with Procedure 6 Time to complete: 1 day Cost to complete: EC$250 Cost to complete: no charge Agency: Grenada Cable & Wireless Agency: Dominica Water and Sewage Company (DOWASCO) St. Kitts and Nevis Procedure 11. Apply for a fixed telephone line Data as of: January 2006 Time to complete: 7 days City: Basseterre Cost to complete: EC$150 Agency: Cable & Wireless Procedure 1. Obtain land usage approval (approval in principal) Time to complete: 21 days Grenada Cost to complete: free of charge Data as of: March 2006 Comments: Buildco must submit preliminary drawings and a site plan. City: St. George’s Agency: Land Usage Board Procedure 1. Submit application and building designs *Procedure 2. Obtain lot plan Time to complete: 1 day Time to complete: 5 days Cost to complete: free of charge Cost to complete: free of charge Agency: Physical Planning Unit (PPU) of the Ministry of Works Comments: Buildco must obtain a topographic plan Agency: Planning Department or private surveyor Procedure 2. Obtain building permit *Procedure 3. Obtain environmental approval Time to complete: 90 days Cost to complete: EC$3000 Time to complete: 5 days Comments: PPU sends copies of the documents to Ministry of Health, Ministry Cost to complete: EC$108 (US$40) of Works, a structural engineer and an architect at PPU. All review the plans and Agency: Planning/Urban Department send recommendations to PPU, which then prepares a report to the Develop- Comments: The environmental approval obtains information on all proposed ment Control Authority (DCA). The DCA meets to decide whether the plan passes chemical and or other entities to be used that will affect the environment. or fails. If it fails, comments are sent to the client for resubmission. If it passes, the permit is issued and construction can begin. If nothing is built on the site for *Procedure 4. Obtain approval on Power Consumption Grid 1 year, the client needs to resubmit the application. Planning from Electrical Department Agency: PPU Time to complete: 5 days Cost to complete: EC$162 (US$60) Procedure 3. Inspection by the Ministry of Public Works Agency: Electrical Department Time to complete: 1 day Cost to complete: free of charge Procedure 5. Obtain approval of building plans Comments: Although inspections are rarely preformed, the Ministry of Public Time to complete: 21 days Works has the authority to inspect a project at any point during construction. Cost to complete: EC$2430 (US$900) Agency: Ministry of Public Works Agency: Planning Department 52 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES DEALING WITH LICENSES Procedure 6. Receive inspection from the Planning Department St. Lucia Time to complete: 1 day Data as of: March 2006 Cost to complete: free of charge City: Castries Agency: Planning Department *Procedure 1. Obtain Health Department approval for Procedure 7. Notify the building authority of the start of construction construction Time to complete: 21 days (2-4 weeks) Time to complete: 1 day Cost to complete: EC$250 Cost to complete: no cost Comments: Present site plan and floor plan, showing adequate drainage and Agency: Planning Department septic tanks. Procedure 8. Receive inspection approval *Procedure 2. Obtain electrical approval from Ministry of Time to complete: 1 day Communications and Works Cost to complete: free of charge Time to complete: 14 days (1-3 weeks) Agency: Planning Department Cost to complete: Approximately EC$1000 [EC$1.5 per point (i.e. electrical outlet), + EC$2 per kilowatt] Procedure 9. Receive final inspection approval *Procedure 3. Obtain approval from Fire Department Time to complete: 1 day Time to complete: 14 days (1-3 weeks) Cost to complete: free of charge Cost to complete: EC$600 Agency: Planning Department Procedure 4. Obtain approval from the Development Control Procedure 10. Obtain occupancy permit Authority’s (DCA) commercial committee Time to complete: 5 days Time to complete: 75 days (2-3.5 months) Cost to complete: free of charge Cost to complete: EC$2200 Comments: Fire department inspects as part of the approval process for obtain- Comments: The committee meets every three weeks. The applicant must ing an occupancy permit. enclose copies of all previous approvals. Agency: Planning Department *Procedure 5. Obtain certificate from electrical inspectors at the Procedure 11. Receive electrical inspection approval Ministry of Communications and Works Time to complete: 3 days Time to complete: 8 days (5-10 days) Cost to complete: free of charge Cost to complete: EC$200 Agency: Electrical Department Comments: This procedure is undertaken once construction is completed. *Procedure 12. Obtain electricity connection Procedure 6. Connect to electrical grid Time to complete: 5 days Time to complete: 14 days Cost to complete: EC$200 Cost to complete: free of charge Agency: Electrical Department *Procedure 7. Receive inspection from WASCO (water *Procedure 13. Obtain water connection department) Time to complete: 5 days Time to complete: 17 days (2-3 weeks) Cost to complete: EC$300 Cost to complete: free of charge Comments: There is no sewage system in Basseterre. Septic tanks are used. The Water Department is not involved in the connection process. A septic tank plan is submitted along with the rest of the application documents to the Local Plan- Procedure 8. Obtain water connection ning Authority, who then approves the connection. Time to complete: 30 days Cost to complete: EC$150 *Procedure 14. Obtain telephone connection Time to complete: 14 days *Procedure 9. Obtain fixed telephone line Cost to complete: EC$150 Time to complete: 10 days (1-2 weeks) Agency: Cable & Wireless Cost to complete: no charge * Procedures 2–4 and 12–14 can occur simultaneously. * Procedures 1–3 and 5, 7 & 9 can occur simultaneously. CASE STUDIES 53 DEALING WITH LICENSES St. Vincent and the Grenadines Procedure 7. Electrical inspection and inspection certificate Data as of: March 2006 Time to complete: 7 days City: Kingstown Cost to complete: free of charge Comments: All applicants for new connections must submit an inspection Procedure 1. Submit building plans to Physical Planning Unit certificate signed by the government electrical inspector. This certificate is only valid for 3 months. Time to complete: 1 week Agency: Electrical Department in the Ministry of Works and Housing Cost to complete: free of charge Comments: Applicant must first obtain a set of conditions and guidelines. Then *Procedure 8. Obtain electricity connection he can submit the application form, building plans and a location map. Agency: Physical Planning Unit (PPU) Time to complete: 14 days (within 7 working days) Cost to complete: EC$250 Procedure 2. Obtain approval of the plan by the Physical Comments: Within two days of the service being connected the builder must Planning Unit pay a deposit equivalent to approximately two months average electricity bills. Agency: VINLEC (St. Vincent Electricity Services Ltd) Time to complete: 35 days (4-6 weeks) Cost to complete: EC$300 *Procedure 9. Request water connection Comments: Upon receipt of the application and building plans the PPU adver- tises the proposed plans in the local newspaper for a minimum of two weeks to Time to complete: 1 day (simultaneous with Procedure 6) officially notify area residents of the proposed commercial construction. If there Cost to complete: free of charge are no complaints and if all other documents are in order, the PPU approves the Agency: Central Water and Sewage Authority application. The approval is granted and the stamped documents and applica- tion are returned to the applicant. *Procedure 10. Obtain water connection Agency: PPU Time to complete: 7 days Cost to complete: EC$300 Procedure 3. Notify the building authority of construction start-up Agency: Central Water and Sewage Authority Time to complete: 1 day Cost to complete: free of charge *Procedure 11. Obtain fixed line phone connection Comments: This is not always done in practice. Time to complete: 7 days Agency: PPU Cost to complete: EC$125 Comments: The applicant must present copies of personal identification along Procedure 4. Receive inspection with the application for a fixed telephone line. Time to complete: 1 day Agency: Cable & Wireless Cost to complete: free of charge Comments: Though inspections are stipulated in the law, they are rarely * Procedures 6 & 9, and 8, 10 & 11 can occur simultaneously. enforced in practice due to limited manpower and resources. There are two conditions under which an inspection will definitely take place: 1. If there is a complaint or the PPU suspects noncompliance or an infraction. 2. If the builder has taken a loan for the construction, the bank will send its own inspectors to the site to ensure conformity with loan requirements. Agency: PPU Procedure 5. Notify the building authority of the completion of construction and receive final inspection Time to complete: 7 days Cost to complete: free of charge Comments: This is a formality and is not always done in practice. Agency: PPU *Procedure 6. Request electrical connection Time to complete: 1 day Cost to complete: free of charge Comments: The builder must submit a standard application form, the Electric Inspection Certificate, copies of personal identification documents, a copy of the business’ Certificate of Registration and a written statement of the required peak electricity demand, work method and times of operation and installed capacity of the machines. Agency: Electrical Department in the Ministry of Works and Housing 54 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES REGISTERING PROPERTY Antigua and Barbuda Once the Land Certificate is issued and the documents are registered, lawyer Data as of: March 2006 and notary fees are usually paid. The fee is usually a percentage of property value (1-5%), but this is negotiable between lawyer and client. City: Saint John’s Documents required: Property value: US$546,000 (EC$1,431,096) • Instrument of Transfer (2 copies required by law) • Proof of payment of all taxes relating to the property *Procedure 1. Preparation of the sale purchase agreement and • Old Land Certificate instrument of transfer • Application for new Land Certificate (optional, blanks available at the registry) Time to complete: 3–4 days Cost to complete: (paid in Procedure 5) Comments: The sale purchase agreement is prepared by a lawyer. At this point * Procedures 1 and 2 can occur simultaneously, but must start on the purchaser usually gives a deposit on the property to the vendor. The vendor different days. guarantees that there are no encumbrances (or they are noted in the agree- ment) and no outstanding taxes associated with the property. Both companies Dominica present the resolution of their shareholders to engage in the transaction, as well Data as of: March 2006 as powers of attorney to act on behalf of the company. At the end of this time City: Roseau period, the parties execute the instrument of transfer (a prescribed form accord- ing to Laws of Antigua and Barbuda, revised in 1992, Vol. 13, CAP 374) and swear Property value: US$189,500 (EC$484,002) the certifications of their signatures. *Procedure 1. Lawyer prepares Memorandum of Transfer *Procedure 2. Title search at the Land Registry Time to complete: 2 days Time to complete: 1 day Cost to complete: 3% of property value Cost to complete: EC$25 Comments: The vendor presents his proof of payment (receipts) of municipal Comments: The lawyer checks for encumbrances at the Land Registry. The reg- taxes to the City Council, a duplicate original of the deed and a copy of the istry is computerized, so the lawyer gives the clerk the block and parcel number. survey plan to the lawyer for preparation of the Memorandum of Transfer. It is The clerk then provides the title record. mandatory for companies in such a transaction to be represented by a lawyer. The lawyer’s fee is regulated by law. Procedure 3. Executed instrument of transfer submitted to the *Procedure 2. Lawyer searches the title at the Land Registry Inland Revenue Commission Time to complete: 1 day Time to complete: 14 days Cost to complete: EC$5 Cost to complete: none Comments: Comments: The Inland Revenue Commission checks to see if all property taxes The records at the Land Registry are recorded by number in the computer have been paid, and assesses the value of the land according to the existing ca- system and the original certificates are kept in paper form. The EC$5 stamp fee is dastre to decide the amount of stamp duty to be paid. When there is a discrep- for an adhesive stamp that can be obtained at a post office, but a lawyer would ancy between the records of property taxes and the cadastral value, evaluation normally have a supply of these for this purpose. officers inspect the property in order to determine its value. Procedure 3. Payment of government fees and stamp duty at the Procedure 4. Payment of stamp duty on the Instrument of Accountant General’s Office Transfer at the Inland Revenue Commission Time to complete: 1 day Time to complete: 1 day Cost to complete: 1% of property value (assurance fund) + 4% property value Cost to complete: 10% property value (purchaser’s stamp duty) + 2.5% property value (vendor’s stamp duty) + 2.5% Comments: Usually the vendor pays 7.5% and the purchaser pays 2.5%, but the property value (judicial fee) parties can negotiate this between themselves. Once it is found that no taxes Comments: are owed, an evaluation officer from the Property Tax Division certifies the rates The lawyer pays all fees on behalf of the clients. Fees are charged to the purchas- and taxes attached to the transfer. Parties pay the assessed stamp duty and the er, except the vendor’s stamp duty (2.5%). The Memorandum of Transfer and the instrument of transfer is stamped. new copy of the Certificate of Title are embossed with proof of payment. Procedure 5. Instrument of transfer is submitted to the Land Procedure 4. Memorandum of Transfer is lodged with Registry Registry for registration Time to complete: 14–60 days Time to complete: 7 days Cost to complete: no additional cost Cost to complete: Registration fee EC$20 + fee for Land Certificate EC$50 + Comments: payment of lawyer/notary’s fees (1-5% of property value) The Registrar signs the Memorandum of Transfer and the copy of the Certificate Comments: The previous Land Certificate must be submitted to the registry for of Title, which is given back to the lawyer. destruction. The documents for the instrument of transfer are then filed with the Documents required: date and time submitted noted on the document itself. All copies are sealed by • Memorandum of Transfer (embossed) the Registry, but only one copy needs the stamps attached. A copy is returned • 2 copies of the survey plan to the buyer. The change of ownership is noted on the requisite register. This is • 2 duplicate originals of the Certificate of Title then submitted to the Registrar of Lands for signature, at which point the trans- fer is considered registered. The application for a new Land Certificate can occur during this time, and is usually issued simultaneously. The registration fee of *Procedures 1 and 2 can occur simultaneously, but must start on EC$20 is paid in stamps at the Antigua and Barbuda Registry of Lands. Lawyers different days. and notaries usually keep a supply of these at their offices for this purpose. The registration fee is EC$20 if no more than 3 months have passed between execution and registration of the Instrument of Transfer. For every month that passes thereafter, a fee of EC$20 applies, not to exceed EC$100. CASE STUDIES 55 REGISTERING PROPERTY Grenada St. Kitts and Nevis Data as of: March 2006 Data as of: March 2006 City: Saint George’s City: Basseterre Property value: US$196,000 (EC$508,034) Property value: US$410,500 (EC$1,101,907) *Procedure 1. Lawyer prepares the Title Deed Procedure 1. Property is surveyed or plan is verified by surveyor Time to complete: 5 days Time to complete: 14 days Cost to complete: 1–2% property value Cost to complete: EC$350 per copy of plan Comments: The purchaser’s lawyer prepares the Title Deed and ensures that Comments: If this is a new property title, the cost for the new survey is all rates and taxes are paid by the vendor. Water rates are paid to the National EC$1000 per acre. Water and Sewerage Authority, and property tax and property transfer tax are paid by the vendor to the Department of Inland Revenue, Ministry of Finance. *Procedure 2. Lawyer prepares Memorandum of Transfer The purchaser pays lawyer’s fees at this point. Time to complete: 14 days Cost to complete: (fees paid in Procedure 5) *Procedure 2. Title search at the Deeds and Land Registry Comments: Lawyer will prepare the Memorandum of Transfer over a period of Time to complete: 5 days about two weeks, during which he will also search the title at the land registry. Cost to complete: EC$200 At the end of this period the parties sign the Memorandum of Transfer. Comments: The lawyer conducts searches on the vendor’s Title Deed, going Documents required: back as far as 60 years. The lawyer also searches the wills under the previous Tax receipts relevant to the property (vendor) and survey plan (obtained in owners and any judgments against the property for the last 12 years. Procedure 1). *Procedure 3. Obtain tax clearance from Inland Revenue *Procedure 3. Lawyer searches the title at the Land Registry Time to complete: 1-2 days Time to complete: 1 day Cost to complete: no cost Cost to complete: EC$5 Comments: During the preparation of the Memorandum of Transfer, the lawyer *Procedure 4. Obtain clearance from National Water and Sewage will search the title at the Land Registry for encumbrances. The fee is EC$5 for Authority an adhesive stamp that can be purchased at the registry or from a post office. Time to complete: up to 14 days Procedure 4. Revenue Receipt Voucher and Memorandum of Cost to complete: no cost Transfer submitted to the Inland Revenue Department Comments: The lawyer sends a written request to the National Water and Sew- age Authority in order to obtain clearance that all water rates and taxes for the Time to complete: 14 days property have been paid. Cost to complete: 12% of purchase price (stamp duty) + $7.20 (registration fee) + 0.2% of purchase price (Land Assurance Fund) Procedure 5. Payment of transfer fee at Inland Revenue Comments: Revenue Receipt Voucher (a standard form) is submitted with the Memorandum of Transfer, along with payment of stamp duty. The stamp duty is Time to complete: 1 day paid by the vendor. All fees are paid at the Inland Revenue Department. Cost to complete: 5% property value Procedure 5. Vendor’s attorney prepares a linen copy of the new Procedure 6. Execution of the deed at the lawyer’s office Certificate of Title and finalizes Memorandum of Transfer Time to complete: 1 day Time to complete: 1 day Cost to complete: (lawyer’s fees paid in Procedure 1) Cost to complete: Lawyer’s fees (cumulative): Comments: Deed is executed in the presence of the lawyer and the check Property purchase price Fee is exchanged for the deed. All previous deeds relating to the land, all papers First EC$25,000 2.5% (including insurance policy), and all keys are delivered to the purchaser. Second EC$25,000 2.0% Remainder 1.0% Procedure 7. Payment of Stamp Duty at the Deeds and Land Comments: At this step the balance of the purchase price is exchanged for the Registry Memorandum of Transfer. The vendor’s attorney prepares a linen copy of the Time to complete: 1 day new Certificate of Title. Cost to complete: 1% property value Documents required: Stamped Memorandum of Transfer and receipts for payment of fees (obtained in Procedure 4). Procedure 8. Registration of the deed in the Deeds and Land Registry Procedure 6. Memorandum of Transfer submitted to Supreme Time to complete: 40 days Court Registry Cost to complete: EC$5 (registration fee) Time to complete: 30-45 days Comments: The deed is collected by the purchaser’s lawyer after registration Cost to complete: (fees paid in Procedure 4) and processing. Documents required: Comments: The Memorandum of Transfer is submitted to the Registrar for • Original deed approval. The old certificate is then cancelled and a new Certificate of Title is is- • New deed (with stamps from Procedure 7) sued. All records at the Registry are in paper format. It can take over a month for • Proof of payment of all taxes and rates relating to the property • History of title *Procedures 1-4 can occur simultaneously, but must start on different days. 56 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES REGISTERING PROPERTY the transfer to be approved because the Registry is often overloaded with work. The schedule of lawyers’ fees is set by the Bar Association of St. Lucia. A mini- Documents required: mum flat fee of EC$100 is charged in addition to a percentage of property value. • One copy of the cadastral survey of land, attached to the linen copy of the Property value: Vendor’s tax: Certificate of Title Up to 50,000 no charge • Proof of payment of all taxes relating to the property Between 50,000 and 75,000 2.5% Between 75,000 and 150,000 3.5% Balance 5.0% * Procedures 2 and 3 can occur simultaneously but must start on dif- The seller will also pay vendor’s tax at this stage. ferent days. Procedure 5. Register title deed with Land Registry St. Lucia Time to complete: 7-14 days Cost to complete: EC$20 Registration fee Data as of: March 2006 Comments: The registration fee is EC$20 for copies of the deed (one to the pur- City: Castries chaser and one for the Registry to keep). Registration time depends on whether Property value: US$240,000 (EC$631,213) or not all documentation is complete and all fees and taxes have been paid. Stamp duty is paid to the Inland Revenue Authority. *Procedure 1. The purchaser’s lawyer conducts search of title at Documents required: Deed of sale Land Registry and retrieves survey plan at the Ministry of Planning * Procedures 1, 2 and 3 can occur simultaneously, but must start on Time to complete: 1-2 days different days. Cost to complete: EC$5 per parcel (property) + EC$1 for survey plan Comments: The Land Registry and Ministry of Planning are located in the St. Vincent and the Grenadines same building, so the title search and retrieval of survey plan can occasionally occur within one day. However, if the file/plan is unavailable (i.e., in front of the Data as of: March 2006 Registrar for other reasons), it would take longer. The plan number is needed to City: Kingstown retrieve the survey plan. (This is usually found on the vendor’s title.) It is com- Property value: US$179,500 (EC$458,174.133) mon practice for a lawyer to conduct these searches. Procedure 1. Search root of title at the Land Registry *Procedure 2. Search for encumbrances at the Registry of the Time to complete: up to 21 days High Court Cost to complete: EC$2 per day + EC$0.50 per page to be copied (on average, Time to complete: 1 day 3 pages) Cost to complete: EC$5 + EC$1 for each page copied Comments: It is common practice for the lawyer or lawyer’s clerk to search the Comments: This search is necessary to ascertain whether or not there are any Index of Deeds at the Lands Registry. This can take a long time if the title is not judgments against the purchaser. Unless all judgments are settled, the transac- properly indexed- i.e., names of individuals not recorded accurately or omitted. tion cannot proceed. If the indexing is not up-to-date, it may be necessary to search individual deeds for the relevant timeframe. Also, the indexing is done by hand and the quality of *Procedure 3. Pay taxes at Inland Revenue Authority paper is diminishing, making the durability of the records more susceptible to wear and tear. The search area is limited and there are several persons searching Time to complete: 1-3 days at the same time. Once the search is complete, a copy of the deed is prepared Cost to complete: no cost and forwarded to the Valuation Office with the details of the property being Comments: In order for the execution of the deed to proceed, both the seller sold, the location of the property and the price agreed by the parties (Procedure and purchaser must have paid all outstanding income taxes and property taxes. 5). During this time, the clerk also searches the Cause Books at the Registry for Therefore, clearance from the Inland Revenue Authority must be granted. This any judgments against the property. usually takes a few days because the Revenue Authority scans all documents and then must send the clearance certificate to the Land Registry. For non-na- *Procedure 2. Conduct company search at the Commerce and tionals, the vendor must pay an additional tax of 10%. Intellectual Property Organization Time to complete: 1 day Procedure 4. Lawyer prepares and executes deed of sale Cost to complete: EC$10 Time to complete: 1-2 days Comments: When companies are involved in the transaction, a search is done Cost to complete: Lawyer’s fees + vendor’s tax + stamp duty (2% of property on the company’s file for the registration number, the directors, secretary and value) + EC$20 the by-laws of the company. Lawyer’s fees: flat fee of EC$100 + % of property value, according to the follow- ing scale: *Procedure 3. Make inquiry to utility services Property value Fee Up to 50,000 2.5% Time to complete: 1 day Between 51,000 and 150,000 1.5% Cost to complete: no cost Between 151,000 and 1 million 1.0% Comments: Utility services (Central Water & Sewerage Authority, Vinlec and Over 1 million 0.5% Cable & Wireless) are contacted to inquire whether or not there are any out- Vendor’s tax: Seller pays vendor’s tax according to the following sliding scale (for standing bills. a St. Lucian national): Comments: Ideally, the lawyer can prepare and execute the deed in one day. However, this is dependent upon receiving the “Radiation� document of discharge of the seller’s mortgage from the bank. If there are no mortgages attached to the property, execution of the deed can be done in one or two days at the most. The purchaser pays stamp duty to the Inland Revenue Authority, in addition to EC$20, which represents stamp duty on two additional copies at EC$10 per copy. CASE STUDIES 57 REGISTERING PROPERTY Procedure 4. Preparation of deed by lawyer Time to complete: 2 days Cost to complete: Schedule of lawyer’s fees as regulated by the St. Vincent and the Grenadines Bar Association Comments: Lawyer (or lawyer’s clerk) witnesses the signature(s) of the vendor and purchaser and signs a declaration that he witnessed the signature of the vendor on the deed. (The purchaser does not have to sign the deed of conveyance.) The declaration is filed during registration. Property value . . . . . . . . Fees EC$1,000 . . . . . . . . . . . . . . . EC$125 EC$1,000–EC$5,000. . . . . Charge as for EC$1,000 with addition of 5% of excess EC$5,000 . . . . . . . . . . . . . . EC$325 EC$5,000–EC$10,000 . . . Charge as for EC$5,000 with addition of 4% of excess EC $10,000 . . . . . . . . . . . . . EC$525 EC$10,000–EC$25,000 . . Charge as for EC$10,000 with addition of 3% of excess EC$25,000 . . . . . . . . . . . . . EC$975 EC$25,000–EC$50,000 . . Charge as for EC$25,000 with addition of 2.25% of excess EC$50,000. . . . . . . . . . . . . . EC$1,538 Over EC$50,000 . . . . . . . . Charge as for EC$50,000 with addition of excess Procedure 5. Valuation of property by the Land Tax Office (Inland Revenue Dept.) Time to complete: 3-14 days Cost to complete: no charge Comments: A copy of the deed is attached to the Valuation Certificate and sent to the Valuation Office (Land Tax Office) for approval. Clerks at the Valuation Office usually conduct a search on the current owner of the property and make sure that all taxes have been paid. If there are no outstanding taxes, the Valuation is returned to the purchaser’s lawyers. It is not mandatory to inspect the prop- erty, but the Valuation Office may decide to inspect if they are not familiar with the property or if the property value is deemed too low. Inspection is conducted by a valuation officer and the chief surveyor. Procedure 6. Registration of the title deed Time to complete: 2-3 days Cost to complete: Stamp Duty 10% (5% paid by purchaser; 5% paid by vendor) + registration fee according to the following scale: EC$40 for the first 15,000 (of sale price), and EC$2.50 per $1000 thereafter. Comments: Once the receipt is issued for payment of stamp duty and registra- tion fees, the time and date of receipt by the Registry is recorded on the deed. The deed is then registered, a number is allocated to it, the original is retained in the records of the Registry (it becomes part of the documents for search) and a copy is handed back to the person registering the deed. Documentation required: • Two copies of the deed with Valuation Certificate * Procedures 2 and 3 can occur simultaneously, but must start on different days. 58 DOING BUSINESS 2007: ORGANIZATION OF EASTERN CARIBBEAN STATES Acknowledgments Contact details for local partners are available on the Doing Business website at http://www.doingbusiness.org Doing Business 2007: Organization of Eastern Caribbean Group’s Caribbean Country Management Unit for her States was prepared by Iva Ilieva Hamel, Zenaida Her- support throughout the project. The project was funded nandez and Melissa Johns. Valuable assistance was re- by the Doing Business project, Foreign Investment Ad- ceived from Diego Borrero, Claudia Contreras, Penelope visory Services (FIAS) and USAID. Expansion of Doing Fidas, Sabine Hertveldt, Adam Larson, Dana Omran, Business coverage to the OECS countries was funded by Rita Ramalho, Sylvia Solf, Justin Yap and Miran Makas. the Ministry for Foreign Affairs of Iceland. Mierta Capaul, Jaqueline Coolidge and Caralee McLiesh More than 115 lawyers, accountants, judges, busi- reviewed the full report. We are grateful for comments nesspeople and public officials participated in the analy- and review provided by the World Bank Group’s Carib- sis found in this report. Their names are listed on the bean Country Management Unit. following pages. The team wishes to extend its gratitude The report was made possible thanks to the contri- to the many officials from the governments of Antigua bution of the United States Agency for International De- and Barbuda, Dominica, Grenada, St. Kitts and Nevis, velopment (USAID) and its Caribbean Open Trade Sup- St. Lucia and St. Vincent and the Grenadines, as well port (COTS) program—with special thanks to Mansfield as to the staff of the Eastern Caribbean Central Bank, Blackwood, Swinburne Lestrade and Sutherland Miller, who provided information for this project. Quotations who reviewed the draft on behalf of COTS. The team is in this report are from local partners unless otherwise also grateful to Rachel McColgan from the World Bank indicated. ACKNOWLEDGMENTS 59 A N T IG UA A N D Eddison St. Jean ST. K I T T S A N D N E V I S Kim Camille St. Rose BA R BU DA Dominica Electricity Service Ltd. Gordon, Gordon & Co. Nicholas Brisbane Eleanor R. Clark Duncan G. Stowe N. Brisbane & Associates Charles Tibbits Clarke & Clarke Duncan G. Stowe Chambers PricewaterhouseCoopers Jamaine Buchanan Carden Conliffe Clarke Charles Tibbits Ministry of Sustainable Leandra Gabrielle Verneuil Commodore & Associates PricewaterhouseCoopers Development Gordon, Gordon & Co. Neil Coates Laurina A. Vidal Camilla Cato Andie A. Wilkie PricewaterhouseCoopers Attorney-at-Law Webster Dyrud Mitchell Gordon, Gordon & Co. Vernon Edwards Dawn Yearwood Idris Fidela Clarke S T. V I N C E N T A N D T H E Freight Forwarding and Attorney-at-Law Financial Services Department G R E NA DI N E S Deconsolidating Stephen Isodore Neil Coates Attorney-at-Law Anthony Atkinson Ann Henry PricewaterhouseCoopers PricewaterhouseCoopers Henry & Burnette Patricia Dublin G R E NA DA Kay Bacchus-Browne Philip Isaacs Dublin and Johnson Anthony Atkinson Kay Bacchus-Browne Chambers OBM Ltd. Kamsha Graham PricewaterhouseCoopers Theodore Browne Hugh C. Marshall Walwynlaw Barristers & Alain Bain Solicitors Attorney-at-Law Marshall & Co. Ministry of Foreign Affairs and Dahlia Joseph Ms. Campbell Brian O’Dornellas International Trade OBM Ltd. Daniel Brantley & Associates Agnes E. Cato Robert Branch Cato & Cato Laurie Roberts Pearletta Lanns Supreme Court Registry High Court of Justice Mira E. Commissiong Andrew DeBourg Equity Chambers Patricia Simon-Forde Marcella Liburd Ministry of Labor Chambers Patricia Simon-Forde Bryant & Liburd Rosann N.D. Cummings Ruggles Ferguson Hughes & Cummings, member of Lex Denzil Solomon L. Everette Martin Granada Bar Association Mundi Development Control Authority Eastern Caribbean Central Bank, Claudia Francis Securities Exchange Paula E. David Christian Sydney PricewaterhouseCoopers Saunders & Huggins, Barristers Christian, Walwyn & Associates Jeoffrey Nisbett and Solicitors Cosmas George Jeffrey & Nisbetts Charles Walwyn Freight forwarder Department of Labour PricewaterhouseCoopers Miselle O’Brian Cyrius Griffith Dublin and Johnson Layne Errol Marietta Warren Ministry of Labor Attorney-at-Law InterFreight Ltd. R & T Design-Build Consultants Kelvin Jacobs Sean Joachim Hesketh A. Williams Clifford Thomas Creative Design CaribTrans Labour Department Department of Labour Nigel John Ada Johnson Vernon S. Veira D OM I N IC A Joseph John & Associates Ltd. Attorney-at-Law Veira, Grant & Associates Claudette Joseph Moulton Mayers Anthony Atkinson Charles Walwyn Amicus Attorneys Moulton Mayers Architects PricewaterhouseCoopers PricewaterhouseCoopers Kurt LaBarrie Floyd A. Patterson Joelle AV Harris Leonora Walwynlaw Creative Design Pannell Kerr Forster Harris & Harris Walwynlaw Barristers & Dickon Mitchell Solicitors Richard Peterkin Eddie Beaupierre Grant Josepth & Co., member of PricewaterhouseCoopers Element Agencies ST. LU C IA Lex Mundi Charles Tibbits Gerald D. Burton Niel Noel Thaddeus M. Antoine PricewaterhouseCoopers Gerald D. Burton’s Chambers Henry Hudson - Phillips & Co. Francis & Antoine Arthur Williams Jofrrey C.G. Harris Richard Peterkin Anthony Atkinson Douglas L.A. Williams Harris & Harris PricewaterhouseCoopers PricewaterhouseCoopers Law Firm of Phillips & Williams Marvlyn Estrado Raymond Anthony Mac Stephen Aubertin Andrea Young-Lewis KPB Chartered Accountants Raymond Anthony & Co. Department of Labour Relations Commerce and Intellectual Noelize N. Knight Property Office Ian H. Sandy Candace Cadasse Gerald D. Burton’s Chambers Amicus Attorneys Nicholas John & Co. Alick C. Lawrence David Sinclair Mary Juliana Charles Attorney-at-Law Grenada Contractors Association Gordon, Gordon & Co. Severin McKenzie / Sinclair Enterprises Ltd. McKenzie Architectural & Willibald Charles Trevor St. Bernard Kaparran Shipping Construction Services Inc. Lewis & Renwick Richard Peterkin Carol J. Gedeon Phinsley St. Louis Chancery Chambers PricewaterhouseCoopers St. Louis Service Joan K.R. Prevost Bradley Paul Avril Trotman Bradley Paul Associates Prevost & Roberts Ministry of Legal Affairs Mark Riddle Richard Peterkin Roselyn Wilkinson PricewaterhouseCoopers Dominica Electricity Service Ltd. Wilkinson, Wilkinson & Wilkinson Arthur R. Smith Trevor Philipe Labour Department Trevor Philipe Agencies Ltd. Doing Business 2007 Organization of Eastern Caribbean States R G E S S.O S I N B U I N G . D O W WW THE WORLD BANK A multidonor service of the World Bank and the International Finance Corporation