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THE WORLD BANK
Table of Contents
Preface v
Introduction Celebrating reform 1
SimeonDjankovandCaraleeMcLiesh
Startingabusiness
EL SALVADOR Starting a business (quickly) in El Salvador 9
JamesNewton,SylviaSolf,andAdrianaVicentini
SERBIA How to double business entry in two years 15
TomJersildandZoranSkopljak
Employingworkers
MACEDONIA Employing Macedonia's youth 20
AdamLarson,KirilMinoski,andJanetMorris
Protectinginvestors
MEXICO Protecting investors from self-dealing 26
MelissaJohnsandJeanMichelLobet
Payingtaxes
EGYPT Adding a million taxpayers 34
RitaRamalho
Tradingacrossborders
PAKISTAN Speeding up trade 39
AllenDennis
Enforcingcontracts
NIGERIA Repairing a car with the engine running 44
SabineHertveldt
Bankruptcy
SERBIA Faster, more orderly exit 50
JustinYap
Acknowledgements 56
Preface
Reforming business regulation takes leadership--more than many other reforms.
Committedleadersprovidevision,energyanddirectiontoimprovingbusinesscli-
mates,ofteninthefaceofdauntingchallenges.
TheU.S.AgencyforInternationalDevelopmentandtheWorldBankGrouparefor-
tunatetoworkwithmanyleadersaroundtheworld,someofwhomarerecognized
intheaccompanyingcasestudiesofreform.Ithasbeenaprivilegetosupporttheir
efforts and to see their results. We have also been pleased to partner together in
manyareasofthiswork,frompioneering"InvestorRoadmaps"or"Administrative
BarriersAnalysis"togetherinGhanainthemid-1990s,tocollaboratinginintro-
ducingtheDoing Businessprojecttosub-nationalgovernmentsandontheattached
casestudies.
We hope that the case studies will inspire others to reform business regulations.
Theyfeaturesuccessfulreformsinthe10areascoveredintheDoing Businessreport.
Thecasestudiesspantheglobe--fromSerbiatoElSalvador,fromEgypttoNige-
ria--andprovidelessonsonwhatittakestosucceed.Itisthroughsucheffortsthat
governmentscanencouragebusinessestoinvest,growandcreatethejobsthatlift
peopleoutofpoverty.
StephenJ.Hadley MichaelKlein
Director VicePresident
OfficeofEconomicGrowth Financial and Private Sector
U.S.Agency Development
forInternational WorldBankGroup
Development
Celebrating reform
SimeonDjankovandCaraleeMcLiesh
Nameyourfavoritedentist.Don'thaveone?That'sbecausenoonelikesgoingtothe
dentist.Sometimeshegivesyouunpleasantnews.Sometimesithurts.Onceyouare
healthyyoustayasfarawayforaslongaspossible.
Reformers are like dentists. Necessary, but generally disliked. Their job is to cure
theeconomyandcreatejobs.Veryoftenthisinvolvesunpleasantnewsandithurts,
initially.Infact,reformersareevenworseoffthandentists:theyaredislikedeven
by their own kind. When a reformist minister says commercial disputes need to
beresolvedfasterinthecourts,thejusticeministeraccuseshimofignorance.Or
arrogance.Orboth.Whenareformistministersayslaborregulationsaretoorigid
andleavemanypeoplestrandedintheinformaleconomy,thelaborministeraccuses
himofignorance.Orarrogance.Orboth.
Inprosperoustimes,reformersaretoldnottorocktheboat.Incrisistimes,theyget
theblamefornotreformingsoonerandavertingthecrisis.Somepursuereforms
whilereceivingpersonalthreatsandthreatstotheirfamilies.Itishardtobeare-
former.
Here are 3 ways to change that. First, document successful reforms and the chal-
lenges that had to be overcome along the way. This helps future reformers and
highlightsthecontributionsofpastones.Second,createaprizetorecognizereform-
ers.MovieshavetheOscars,sciencehastheNobels,andsportshavetheOlympics.
Reformerscanhaveawardstoo.Finally,encouragereformerstowriteuptheiroften
dramaticstories.Imagineifthesewereturnedintomovies.Itwouldonlytakeafew
filmsstarringJudeLaw,AngelinaJolieandGeorgeClooneytomakereformersmore
popular.
Doing Businessdevelopsthefirstidea,bypresenting8casestudiesofrecentreforms.
Thesespantheglobe--fromSerbiatoElSalvador,fromEgypttoNigeria--andshow
what it takes to succeed. The case studies show several patterns: Reforms usually
happen when new governments take office. They often follow crises. Reformers
don't have time for concepts like "getting the right sequencing" and "finding the
binding constraint." Reformers are helped by active media and information cam-
paigns.Andreformsmaybenefitfromtappingdevelopmentexperts,outsideexper-
tise(beitfromISO9000inspectorsorMicrosoft'ssoftwareengineers),andlessons
fromothercountries.
Wealsotakeonthesecondidea,byorganizingthefirstannualawardsforoutstand-
ingreformers(detailsavailableatwww.reformersclub.org).Thethirdideaiswaiting
foritschampion.
CELEBRATING REFORM
Reforms are on the rise
Reformstomakeiteasierforbusinessestooperateareontherise.In2005-06,213
reformstookplacein112countries.Thiscomparesto185reformsin99countries
in2004-05.And89reformsin58countriesin2003-04.
Four reasons explain the upswing. First, the collapse of socialism and the entry
of Eastern Europe and the former Soviet Union in the world economy. Over the
lastdecade,thisregionhasledinreforms(figure1).Thisisnotsurprising:theen-
vironmentfordoingbusinessintheprivatesectorwasdifficultsoalothadtobe
changed.
Second,theincreaseinglobalandregionalcompetition.Regionalagreementssuch
astheUSfreetradeagreementswithCentralAmericancountriesandaccessionof
Eastern European countries into the European Union (EU) have generated huge
reformmomentum.Also,Chinahasbecomeeveryone'scompetitor.In2005-2006,4
ofthetop-10reformershavereformedtoenterregionalagreements:Croatia,Gua-
temala,PeruandRomania.Chinawasatopreformertoo(table1).Countriesare
competingforinvestment,enterprises,andthejobsthatcomewiththem--andasa
resultitisgettingeasiertodobusinessaroundtheworld.
Third, a new focus on reducing corruption. Many reforms to business regulation
aremadenottoincreaseefficiencybuttocutthecorruptpracticesofgovernment
officials.ThisisillustratedmostvividlybyGeorgia,thetopreformerinDoing Busi-
ness 2007 and also the country achieving the biggest drop in corruption in all of
Europe--in200237%ofbusinessessaidthattheyfrequentlypaidbribescompared
withonly8%in2005.
FIGURE 1
The pace of reform is strong in most regions outside of Asia
Percentage of countries that made at least one positive reform
In 2004 In 2005/06
Eastern Europe
& Central Asia
OECD
high income
Latin America
& Caribbean
Sub-Saharan
Africa
Middle East
& North Africa
East Asia
& Paci c
South Asia
0 20 40 60 80 100 0 20 40 60 80 100
Source: Doing Business database.
CELEBRATING REFORM
Table 1
The top 10 reformers in 2005/06
Starting Dealingwith Employing Registering Getting Protecting Paying Tradingacross Enforcing Closinga
Economy abusiness licenses workers property credit investors taxes borders contracts business
Georgia 3 3 3 3 3 3
Romania 3 3 3 3 3 3
Mexico 3 3 3
China 3 3 3 3
Peru 3 3 3 3 7
France 3 3 3 3 3
Croatia 3 3 3
Guatemala 3 3 3
Ghana 3 3 3
Tanzania 3 3 3 3
Note: Economies are ranked on the number and impact of reforms. First, Doing Business selects the economies that reformed in 3 or more of the Doing Business topics. Second, it ranks these economies on the
increase in rank in the ease of doing business from the previous year. The larger the improvement, the higher the ranking as a reformer. "X" indicates a negative reform.
Source: Doing Business database.
Finally, what gets measured gets done. New indicators on business regulations in
Doing Business--and from other sources--allow countries to identify bottlenecks
and compare their performance with competitors. This inspires competition--no
onelikeslookingworsethantheirneighbors.In2000,EUcountriesagreedtotrack
thetimeandcosttostartabusiness.Sincethen,everyEUcountryhasmadestartup
easier.Theeffectisevenstrongerwhenmeasurementislinkedtofinancialincentives.
WhentheUnitedStates'MillenniumChallengeAccount(MCA)madeeligibilityfor
fundingdependentontheeaseofbusinessstartup,countriesfromBurkinaFasoto
ElSalvadortoGeorgiatoMalawistartedreforms.IndonesianFinanceMinisterSri
MulyaniIndrawatiarguesthattherealimpactoftheMCAisits"goodhousekeep-
ingsealofapproval,"whichsendsapowerfulsignaltoinvestors."It'snotaboutthe
money.It'sabouttherecognitionthatwe'redoingtherightthing."
How reforms are done
Theexistingmanualsonreformsofferasimplerecipe:takeastrongreformcham-
pion,mixinhighly-qualifiedtechnicalstaff,throwinvaluableadvicefromdevel-
opmentexperts,stiritjusttherightamountoftime,andservewhilestillhot.The
problemisthatreformersoftenmisssomeingredientsandtheresultscanbeabit
lumpy.Herearesomeideasonsubstitutes.
A lot of reforms are sparked by crisis. But there's no need to wait for one to get
change--crises always make things more painful. Reformers can create a sense
of urgency to motivate change--in Nigeria, people were shocked when reformers
publicizedfindingsthat99%oflawyersagreedthejudiciarywascorrupt.InMexico,
reformersusedtheEnronandWorldComscandalsinUnitedStatestopushthrough
higherMexicancorporategovernancestandards.In2004,atthestartoftaxreforms,
Egyptian Finance Minister Youssef Boutros-Ghali pointed to weakening govern-
mentfinancesandsaid,"Doingnothingisdefinitelynotthesolution.Thegreatest
enemytoreformsisinertia."
CELEBRATING REFORM
Weknownearly85%ofreformsintopreformingeconomiestookplaceinthefirst
15monthsofanewgovernment.Butevenwithoutanewpoliticalmandate,reform-
erscanachievealotbysimplifyingadministrativeprocedures.Whenthegovern-
ment succeeds in early reforms, citizens start seeing benefits--more jobs, more
resourcesforhealthandeducation.Theappetiteforfurtherreformsgrows.Unable
tomakelegislativechangeseasily,ElSalvadorcutthetimetostartabusinessfrom
155daysto26within2years--allthroughadministrativereformsatthecompany
registry.Nowtheyareworkingonthelaw.ReformersinPakistanimplementedad-
ministrativereformsimmediatelywhilepreparingthegroundforthemoredifficult
andcostlylongertermreforms.OneofKenya'sreformersnotes,"Ifwehadwaited
forlawstodoanumberofthingswe'redoing,wewouldnotbedoingthem."
Askdevelopmentagenciesaboutreformstrategiesandthey'lllikelytalkaboutad-
dressingthebindingconstrainttogrowthorsequencingthereformsefforts.Aska
successfulreformerandthey'lltalkaboutseizingtheopportunity,anyopportunity.
"Reformislikerepairingacarwiththeenginerunning,"saysMahmoudMohieldin,
the Egyptian minister of investment. In Nigeria it did not take years of strategiz-
ingbeforereformingthecourts.Tenmonthsafteranewattorney-generalofLagos
Statetookoffice,26newjudgeswereappointed,specializedcommercialdivisions
set up, and judges' salaries increased. In another example, property registration
wasreformedinGeorgiain4monthsfollowingtheRoseRevolution.Theprevious
governmenthadspent6yearsgoingthroughthemotionsofcommissioningstudies,
consultingwithexperts,andsponsoringseminars.
Thestrongestoppositionusuallycomesfromwithin.InPakistan,customsworkers
wereunhappywiththeintroductionofmoreefficientproceduresandtriedtosub-
vertreform.InMexico,aprominentmediatycoonlobbiedforweakeneddisclosure
laws.InSerbiaandBulgaria,theministersofjusticedidnotwanttoyieldpowerto
moreefficientcompanyregistries.InPeru,amodernizedcollateralregistrypromised
tohelpborrowersbutthreatenedthebusinessofnotaries,whoprotestedloudlyand
managedtoderailthereforms.InseveralEuropeanUnioncountries,notaryassocia-
tionslobbyagainsttheadoptionofelectronicsignatures--whichhasvastpotential
tosimplifybureaucracy.(Thismaychange:recentlytheEuropeanCommissionfiled
anti-competitivenesschargesagainst9notaryassociations.)
Onceyoudesignthereformswell,thenextwaytoovercomeoppositioniswitha
smartoutreachcampaign:tellingpeoplethesearethereformswearedoingandthis
ishowtheyaregoingtohelpyou.Butmostreformersdon'tspendenoughtimeon
outreach.Oppositionbuildsandfewentrepreneursgrasphowmucheasierlifecan
beafterthereforms.ElSalvadorianreformersworkedwiththemediatoexplainand
buildsupportforthechanges.Otherreformersbargaineddirectlywithstakehold-
ers.InMacedonia,laborunionswereatfirstdeeplyopposedtothereform.Butonce
theywerebroughtintothereformprocess,theyworkedwiththegovernmentand
employerstoimproveregulation.Keytomakingthereformworkwasincludingthe
unionsinthedraftingofthenewlaw.
CELEBRATING REFORM
Sometimes,areformerevenmanagestoconvincetheopposition.InSerbia,study
toursforbankruptcyjudgesbenefitedthereformeffortasmuchastheybenefited
thejudges:"Foreverydimewespentonthetours,wesavedtenfoldfromnothaving
tospendmoneyonovercomingresistancefromthejudges.Theywerewelcoming
thenewlawinsteadoffightingit."OneUSAIDexpertsaidthatthestudytoursbol-
steredthecredibilityofreformersintheMinistryofEconomy,asjudgescould"feel
andtasteandsmell"forthemselvesandweremoreconvincedthatwhattheywere
beingtoldcouldbeputintopractice.
Reformerscanalsoblamechangesonoutsiders.ItisnoaccidentthatEasternEu-
ropeisthefastestreformingregion.Reformerstherecouldpushthroughcontrover-
sialchangesbysayingthattheEUrequiresthem.AndElSalvadorusedaccesstothe
MCAasareformrationale.
Sometimes a reformer needs luck. A fluke of timing helped Mexico overhaul its
securitieslaws,areformthatDoing Business 2007named"ReformoftheYear.""We
finisheddraftingthebillinMarch2004,toolatetosubmittoCongressthatterm.
ButinsteadofwaitinguntilOctober,wedecidedtoshowittopeopleintheprivate
sector,"relatesJos�AntonioGonzalez,directorgeneralforSecuritiesandInsurance
intheMinistryofFinanceandakeydrafterofthenewlaw."Theirinputmadeall
thedifference."
Allreformersgainfromusingindicatorsthatallowthemtomonitorprogressand
changecoursewhenneeded.InNigeria,theNationalJudicialCouncilannounced
ratingsofjudicialperformanceinMay2006.Judgesnowknowtheyarebeingmoni-
toredbyaninstitutionwithdisciplinarypower.Thepoorestperformershavealready
leftthebench.InElSalvadorconstantcustomerfeedbackonideasaboutimproved
efficiencywascrucialinmeasuringsuccessofthereformsandidentifyingwhatwas
stillmissing.Withclientsastheevaluatorsofperformance,reformsquicklybecame
moreappreciated--andcustomer-orientationbecamemorethanabuzzword.
Who benefits from reform
InBolivia400,000workershaveformaljobsintheprivatesector--outofapopula-
tionof8.8million.InIndia8millionworkershavesuchjobs--inacountryof1.1
billionpeople.InMalawi,50,000outofapopulationof12million.InMozambique,
350,000inacountryof20million.
Reformcanchange this, bymaking iteasier for formalbusinesses tocreatemore
jobs.Womenandyoungworkersbenefitthemost.Bothgroupsaccountforalarge
shareoftheunemployed(figure2).Reformalsoexpandsthereachofregulationby
bringing businesses and workers into the formal sector. There, workers can have
health insurance and pension benefits. Businesses pay some taxes. Products are
subjecttoqualitystandards.Andbusinessescanmoreeasilyobtainbankcreditor
usecourtstoresolvedisputes.
CELEBRATING REFORM
FIGURE 2
Between2002and2006Slovakia'sre- High unemployment among youth,
forms have helped cut the number especially females
of unemployed people by 67,000. In
Middle East
Colombiareformsofemploymentand & North Africa
businessstartupregulationshavecre- Latin America
& Caribbean
ated300,000jobsintheformalecon- Eastern Europe
omy. Another success story comes & Central Asia
from Peru, where in the past decade Sub-SaharanAfrica
the government has issued property OECD
high income
titlesto1.3millionurbanhouseholds.
South Asia
Secure property rights have enabled FEMALE YOUTH
parentstofindjobsratherthanstaying East Asia ALL YOUTH
& Paci c
home to protect their property. Simi-
0 5 10 15 20 25
larly, children can now attend school. Unemployment rate (%)
Asaresult,theincidenceofchildlabor Source: ILO (2005).
hasfallenbynearly30%.
AhypotheticalimprovementonallaspectsoftheDoing Businessindicatorstoreach
thelevelofthetopquartileofcountriesisassociatedwithanestimated1.4to2.2
percentage points in annual economic growth. This is after controlling for other
factors,suchasincome,governmentexpenditure,investment,education,inflation,
conflict,andgeographicregions.Incontrast,improvingtothelevelofthetopquar-
tileofcountriesonmacroeconomicandeducationindicatorsisassociatedwith0.4
to1.0additionalpercentagepointsingrowth.
Thegainscomefrom2sources.First, FIGURE 3
businessesspendlesstimeandmoney More reforms, higher equity returns
ondealingwithregulationsandchas- Equity market returns (percent, 2003�2006)
ing after scarce sources of finance. 80 �
Positive
Instead, they spend their energies on reforms �
producingandmarketingtheirgoods. 60 Negative �
� � �
� � �
The association between reforms and 40 reforms � � � �
moreprofitablebusinessesisbestseen � � � � � � � � �
� � �
� � � �
in the increase in equity market re- 20 � � � �
�
� �
� �
�
turns (figure 3). Second, the govern-
0
ment spends fewer resources regulat- 4 2 0 2 4 6 8 10
ing and more providing basic social Source: MSCI, available at www.mscibarra.com, Doing Business database.
services.
CELEBRATING REFORM
What can development agencies do
If we were at the Oscars, development institutions would take a best-supporting
actorawardforseveralofthereformsdescribedhere.Thelargeimprovementsin
thebusinessenvironmentinSerbia,Macedonia,ElSalvador,Guatemalawerehelped
bytheadviceandattentionofeithertheWorldBank,theUSAID,theMCA,ora
bilateralagencylikeSweden'sSIDA.
Forexample,in2004donorsincludedareformofbusinessregistrationinthelistof
10prioritiesforthenewSerbiangovernment.TheSwedishInternationalDevelop-
mentAgencywasthebiggestsupporterofthereform.TheWorldBankandUSAID
commissioned several consulting studies, and Microsoft Corporation provided
softwareinstallationexpertise.Thetotalcostofreformwasabout2million($2.3
million).Theregistryisnowfullyself-financing.
As another example, in November 2005 the Ministry of Finance of Mexico made
anall-outefforttoshepherdanewsecuritieslawthroughCongress.Butopponents
offered amendments that would affect 4 key provisions of the bill--amendments
thatwouldevisceratethelaw'ssmallinvestorprotections.Tohelpmakethecasefor
reform,FinanceMinisterDiazaskedtheWorldBank'sDoing Businessteamtouseits
"protectinginvestors"indicatorsandbenchmarkthedraftproposedbythegovern-
mentagainsttheexistinglawandagainstthewatered-downalternativeproposedby
aprominenttycoon.
Theresultswerestriking.Undertheexistinglaw,Mexicoranked125of145countries
measuredbytheDoing Businessinvestorprotectionindex,withsomeoftheweakest
protectionsintheworldforminorityshareholders.AmongLatinAmericancoun-
triesmeasured,onlyHondurasandVenezuelahadweakerinvestorprotection.
If Mexico passed the law as presented by the Ministry of Finance, Mexico would
shoot up the ranking index 92 places--to 33. Under the alternative law, Mexico's
rankwouldhavefallento132."ThesimulationsstirredenormousinterestinCon-
gress and in the media by showing the dramatic differences in Mexico's business
environmentifthelawwerenotadopted,"saysoneMinistryofFinanceofficial."If
approvedasproposedbythegovernment,thenewlawwouldenhanceinvestorpro-
tectionandfosterinvestmentinpubliclytradedandevenprivatelyheldcompanies.
Butifthechangesproposedbytheoutsidegroupwereaccepted,theoppositewould
happen."
Money sometimes helps: to finance new computers and refurbish courts or more
generallyprovidethegovernmentwithspaceto"buyout"opponentsofreforms.But
mostreformstobusinessregulationaren'texpensive.TheSerbianbusinessstart-up
reformscost2million.TransformingMacedonia'slaborlawscostonlythetimeof
legaldrafters.ElSalvadorianreformersspentonly$90,000.Instead,donorshelpby
bringing in relevantexperience fromothercountriesandbykeepingthe political
determinationofthegovernmentunwavering.
CELEBRATING REFORM
Perhapsthebiggestcontributiondevelopmentagenciescanmakeistobenchmark
reformprogress.Publishingcomparativedataontheeaseofdoingbusinessinspires
governmentstoreform.SinceitsstartinOctober2003,the Doing Businessproject
hasinspiredorinformed86reformsaroundtheworld.Mozambiqueisreforming
severalaspectsofitsbusinessenvironment,withthegoalofreachingthetoprank
ontheeaseofdoingbusinessinsouthernAfrica.BurkinaFaso,MaliandNigerare
competingforthetoprankinWestAfrica.Georgiahastargetedthetop25listand
uses Doing Business indicators as benchmarks of its progress. Mauritius and Saudi
Arabiahavetargetedthetop10.
Comparisonsamongstatesorcitieswithinacountryareevenstrongerdriversof
reform. Recent studies across 13 cities in Brazil and 12 in Mexico have created
fierce competition to build the best business environment. The reason is simple:
with identical federal regulations, mayors have difficulty explaining why it takes
longerorcostsmoretostartabusinessorregisterpropertyintheircity.Thereare
noexcuses.
Tobeusefulforreformers,indicatorsneedtobesimple,easytoreplicateandlinked
to specific policy changes. Only then will they motivate reform and be useful in
evaluating its success. Few such measures exist. But this is changing. In several
countries, such as Mali and Mozambique, private businesses now participate in
identifyingthemostneededreforms.Usedtobottomlines,theybringarenewed
focusonmeasurement.Thecultureofbureaucratstellingbureaucratswhat'sgood
forbusinessisdisappearing.Goingwithitistheaversiontomeasuringtheresults
ofregulatoryreforms.
Starting a business (quickly) in El Salvador
JamesNewton,SylviaSolf,andAdrianaVicentini
On24January2006PresidentAntonioSacaannouncedthelaunchofthenewone-
stopshopattheCommercialRegistry,combining8startupproceduresinto1.Start-
ingabusiness,whichtook115daysbeforereform,nowtookonly26.Thenextday
thevicepresidentcuttheribbonatthebusinessregistrysite.Thingsweregoingwell,
thankstoa4-yeareffort."Everythingcanbedonein1placenow,"saysFelixSafie,
directoroftheNationalCentralRegistry.
Startingabusiness,oftenthefirstcontactbetweentheentrepreneurandthegovern-
ment,wasintimidatingbeforethereforms.Ittookalotoftimeandmoney--115
daysandmorethan$2,700infees,plus$2,850thathadtobepaidupfrontasmini-
mumcapital.This,foracountrywithaverageincomepercapitaof$2,145.Itwasnot
uncommonforaseniormanagertospend10hoursadaydealingwithadministra-
tiveformalities.Notsurprisingly,38%ofentrepreneurssimplystartedtheirbusiness
informally,neverregisteringorpayingtaxes.
Thismeantlessrevenueforthegovernment,lessprotectionforconsumers,andno
socialsecuritybenefitsforemployees.Italsomeantthatcompaniesusuallystayed
small.Investinginnewmachineryorabiggerofficebuildingwasdifficultwithout
accesstobankloans.Andthentherewastheconstantworryofbeingdiscoveredby
theauthorities.
Pressure started rising after several studies highlighted the issue. In addition, the
complexstartupprocedurespreventedElSalvadorfromqualifyingforfundingfrom
the U.S. Millennium Challenge Account. Funds went only to countries that dem-
onstrated above-average performance on several policy and economic indicators,
includingthetimeandcosttostartabusiness.Somethinghadtobedone.
Safiedecidedtoact.SincehehadbeencalledbythepresidenttoheadtheCentral
Registryin1999,hehadalreadyreformedthepropertyregistry.Nowhefocusedon
thecompanyregistry.Aformerbusinessowner,heknewthatthewaytochangewas
toshiftthefocusfromwhatbureaucratswantedtowhatcustomersneeded.In2001
ahumanresourceconsultancy,HGConsultores,studiedtheregistry'sorganization
andrecommendedthatitbecomeISO-certified.Thismeantcomplyingwithaseries
ofstandardsforqualityassuranceinclientservice.Safielikedtheidea.Itwouldgive
thereformaspecifictarget.
Laying the groundwork for change
TheISOprocessofferedasimpletargetforthereform,basedonthemotto"what
getsmeasuredgetsdone."First,"saywhatyoudo,"thatis,documentproceduresfor
workaffectingproductorservicequality.Second,"dowhatyousay,"meaningretain
recordsoftheactivitiestomeasureandrecordcompliance.Third,"improvewhat
you do" by comparing set goals and actual results, and correct the problems that
causethedifferences.InFebruary2003workinggroupswereformedtoanalyze3
linesofwork:companydocumentation(suchascommercialregistration),thebusi-
nesslicense,andtheregistrationoftheinitialbalance."Thisreviewprocessiswhat
0
Starting a Business CASE STUDY: EL SALVADOR
tookthemosttime,almostawholeyear,"remembersManueldelValle,whomSafie
nominatedasthenewdirectoroftheCommercialRegistryinJune2003,"butthe
bulkoftheworkwasdone."
And since most of it was done in-house, costs were low. Outside experts on ISO
standardsprovidedsomeinitialtrainingandguidance,butsoontheregistry'sem-
ployeestookover.TheyalsowrotethenewISOmanual(Documentaci�ndeSistema
deGesti�ndelaCalidadorQualityManagementSystemDocumentation).Itout-
linedforallemployeesanarrativeandschematicmaptoguidethemthroughtheir
and(everyoneelse's)processeswithintheregistry.Theguidelinesalsospecifiedhow
tocorrectmistakesandmakesurethattheyarenotrepeated.Eachemployeehasa
copyofthemanualandisabletorefertoit.Monthlymeetingsperiodicallyreassess
therules.Anychangesarepublishedontheregistry'swebsite.
Oncethebaselineproceduresweredocumented,thereformsstartedinNovember
2003."Everyonehadbeeninvolvedfromthebeginningandwasreadytogo,"says
delValle.First,thestaffwasorganizedintosmallteams.Eachemployeewaspartof
ateamaccordingtohisorherworkstreamandtask(gruponatural)andareform
group(grupodeproyectosdemejora).Theteamsmeteveryweektodiscusstheir
previousworkweek,whatwentwrong,andhowtoimproveit.Duringtheweekstaff
measuredresponsetimesandthoughtofwaystocutorrearrangeinefficientprocesses.
Allmeetingsweredocumentedwithactionitemsforfollow-upthenextweek.
The customer as evaluator
To check on implementation and measure results, a new quality control unit was
created.Itsolicitedcommentsfromtheregistry'scustomersonthequalityofservice
through written and phone surveys and a prominently displayed suggestion box.
So-calledmysteryshoppers,differentpeoplecontractedbythequalitycontrolunit,
tested the friendliness of client service and processing times. The results of these
surveyswereusedtoseewherefurtherimprovementswereneeded.
Theeffortspaidoff.Afterayearofhardworkthemajorbottleneck,processingbusi-
nesslicenses,wasfixed.Thetimetostartabusinessfellfrom115daysto40byJanu-
ary 2005. The original goal of 85% customer satisfaction was exceeded. In March
2005theregistrybecameISOcertified,thefirstinLatinAmerica.
Thingsalsostartedmovingatthetopofthegovernment.Inthepresidentialcam-
paign of 2003-04, soon-to-become-president Antonio Saca promised to launch a
programcalledProgramaPresidencial--ElSalvadorEficiente.Theprogramwould
improvethelocalbusinessenvironmentbycuttingredtape.
Inthe1990sthegovernment'seconomicpolicieshadfocusedonensuringmacro-
economicstability.Successfully:thecountryrecoveredstronglyaftertheendofthe
civilwar.Buteconomicgrowthslowedtoanannualaverageof3.9%in1995�99,and
1.9%in2000�04.Concernedaboutthistrend,PresidentSacarealizedthatmacro-
economicstabilitywasnotenough.Redtapewastyingdownbusinessesandholding
Starting a Business CASE STUDY: EL SALVADOR
backinvestors,bothdomesticandforeign.
Withanincreasinglyopenmarket,competitionwasonlybecomingstronger.ElSal-
vadorhadbeennegotiatingtheDominicanRepublic�CentralAmericaFreeTrade
Agreement. In December 2004 it was the first country to ratify the agreement. If
nothingwasdonetomakedoingbusinesseasierinthecountry,chanceswerethat
localcompaniesmightbeoverrunbyfiercecompetition.
AttheinsistenceofPresidentSaca,EduardoZablah-Touche,headoftheTechnical
SecretariatofthePresidency,developedaplantoeliminate,simplify,andredesign
bureaucraticprocessesthatadverselyaffecttheefficiencyandfunctioningofbusi-
nesses.BothmenknewwhatitwasliketobeabusinesspersoninElSalvador.Before
beingelectedinMarch2004Sacalobbiedonbehalfofprivatebusinessesaspresi-
dentoftheNationalAssociationofthePrivateEnterprise.Zablah-Touchehadbeen
directorofvariouscompaniesandstartedafewofhisown."Thehappiestmoments
arewhenanewcompanyisborn."
How far can you get without changing the law? A long way
When it was time to start implementing the plan, the technical secretary formed
severalreformcommitteestofocusonredtapefortrade,visarequirements,con-
struction and environmental permits, and closing a company. Every committee
includedrelevantpublicofficialsandbusinesses.InOctober2005theCommission
for the Study of Reforms to the Commercial Code was established to review the
commercialcodeandsimplifybusinessstartup.
BackedbysupportfromthePresident,MayradeMor�n,thedirectorofthecommis-
sion,wastednotime.Shewantedresultsquickly.Shealsoknewthatlegalreforms
took time in El Salvador. "Anything that Congress has to approve takes at least 8
months." Her solution: let's see how far we can get without legal changes, just by
reducingbureaucracy.
Anyproceduresnotexplicitlyrequiredbylawwerefirsttogo.Chanceswerethat
theymadelittlesenseanyway.Forexample,certainministriesrequiredthatphoto-
copieshadtohavecertainsizemargins,withadditionalnotarizationstoensurethat
thecopywasaccurate.OnlyveryfewphotocopybusinessesinSanSalvadorcould
providethisservice.
Next, a single window would be established to allow entrepreneurs to complete
formalitieswithdifferentagenciesin1visit.Visitshadbeenrequiredto5different
publicagencies.Thiswasnotthefirsttimetheideaofasinglewindowhadcomeup
inElSalvador.Alreadyin2000a1-stopshop(OficinaNacionaldeInversiones)had
beencreatedinSanSalvador,withbranchesopenedinSonsonateandSanMiguel
in2005.Entrepreneurscouldsubmitalltheirdocuments,butthestaffstillhadto
organize the registration at different agencies. This took time. And many people
thoughtthattheservicewasonlyforforeigninvestors,thoughitwasalsoopento
localinvestors.
Starting a Business CASE STUDY: EL SALVADOR
Theplanwastoputofficialsfromthedifferentagenciesin1building.Mostimpor-
tant,theywouldhavetheauthoritytocompleteanyformalitybybeingelectronically
connectedtotheirrespectiveagencies.Entrepreneurswouldbeabletocomplete8
different formalities in 1 place--the company registration, the registration of the
initial balance sheet, obtaining the business license, tax ID for both income and
value-addedtax,officialinvoicepapers,socialsecurityregistration,andthenotifica-
tionoftheMinistryofLabor.
It was quickly decided that the customer-oriented commercial registry, with its
modern technology, would host the other agencies. To make implementation
quickerandsmoother,thecommissionpostponeditsgoalofintroducingasingle
registrationform,sincethatmightrequirechangesinagencycomputersystems.
A busy November 2005
The Technical Secretariat coordinated the development of service guidelines with
interagency working groups and informed the public about the planned single
window.Afteraschedulewasdevelopedforreallocatingthedelegatestotheregis-
try,workbeganinNovembertobringalltherelevantagenciesonboardandstart
implementingthereform.In1weekacoregroupoftechnicians,legalconsultants
from the affected ministries, and members of the reform commission drafted the
guidelines.AdaylaterthetechnicalsecretarymetwithtopofficialsoftheMinistry
ofLaborandtheSocialSecurityInstitute(InstitutoSalvadore�odelSeguroSocial)
topersuadethe2toreform.
Itworked."Thiswasourgreatadvantage,"recallsMor�n."Thetechnicalsecretary
wasnotdirectlyaffectedbythereform,butwaslinkedtothepresidency.Wecould
playtheroleofmediatororpushfordecisionswhentheprocessgotstuck."Thefollow-
ingweek,thereformplanswerediscussedwithallinstitutionsinvolved.Eachinstitu-
tionchoseitsdelegatedofficials,andtechniciansplannedthecomputerconnections.
InthethirdweekofNovemberequipmentandpeoplecouldbemovedtothereg-
istry.Tosavetimeandmoney,delegatesatfirstbroughttheirowncomputerequip-
ment.Formalitiesweredoneonsite,withtheinformationsentelectronicallytothe
supervisingagency."Thankfully,mostoftheotheragencieswerealreadycomputer-
ized,whichmadethetransferandconnectionmucheasier,"saysMor�n.Onlythe
MinistryofLaborwasnot.Butsinceasimplenotificationsuffices,thedelegatecan
stampthepaperatthesinglewindowandhavethepackagedeliveredtotheministry
attheendoftheday.
On21November2005thefirsttestswereconducted.Afewdayslaterarandomcli-
entwasaskedtotestthesystem.Basedonthisexperience,theguidelinesandsystem
wereadjusted.Testscontinuedinthefollowingweekstomakesurethateverything
wasreadyfortheofficialopeninginJanuary2006.Thistimethecommissionmade
surethatthereformwouldnotgounnoticed,planning2majorlaunchevents.
Starting a Business CASE STUDY: EL SALVADOR
Thereformspiritreceivedanotherboost.InDecember2005ElSalvadorbecame1
of2lower-middle-incomecountriesworldwidetoqualifyforMillenniumChallenge
Corporation(MCC)funding.(TheotherwasNamibia.)
On 24 January 2006 the president announced the opening of the single window
togetherwiththeofficiallaunchofElSalvadorEficienteatthepresidentialpalace.A
daylaterthevicepresidentcuttheribbonattheregistryinthepresenceofhigh-level
officialsfromtheministries.
Andso,3monthsafterthefirstmeetingofthereformcommission,thenewsingle
windowwasoperating.Entrepreneursfelttheresultsimmediately.Withallagencies
in1place,paperworkwascutbymorethanhalf.Justbyhavingdifferentagencies
shareinformation,24separaterequirementswereeliminated."Before,Ihadtogive
acopyofthecompanystatutestoeachofseveralagencies.NowIjustneed1copyfor
thecompanyregistryandtheypassitontothetaxauthorities,"saysoneentrepre-
neur.Thetotaltimetostartabusinessdroppedevenfurther,from40daysto26.
InNovember2006theMCCBoardofDirectorsapproveda5-year,nearly$461mil-
liongrantforElSalvadortostimulateeconomicgrowthandreducepovertyinthe
country'snorthernregion,wheremorethanhalfthepopulationlivesbelowthepov-
ertyline.Thegrantisestimatedtoimprovethelivesofabout850,000Salvadorans
throughstrategicinvestmentsineducation,publicservices,enterprisedevelopment,
andtransportationinfrastructure.Incomesintheregionareexpectedtoincreaseby
20percentoverthe5-yeartermoftheprogram,andby30percentwithin10years.
"We have improved substantially the environment to do business in El Salvador,"
said President Saca proudly. "We reduced the cost and time for the government
formalities.Withtherecentlaunchoftheone-stopshopattheCentralRegistryfor
companystartup,wereducedthenumberofdaystoregisterabusiness,reducingthe
costby67%.TheseeffortshavebeeninternationallyrecognizedbytheWorldBank,
whichplacedusasoneofthetop15reformersworldwideinthe2007reportand
movedusup4positionsontheglobalranking."
What made it work?
Reformcanstartonalllevels,particularlywhensimplifyingthebureaucracy.Andit
doesnothavetocostmuch.TheISOcertification--includingaudits,training,and
15ISOcertificates--cost$66,600.Togetherwithabout$12,000forexternalconsul-
tantsandnewequipment,thisamountstobuying4ToyotaCamriesintheUnited
States.Asanaddedbenefit,sincetheemployeesredesignedprocesses,wroteguide-
lines,andestablishednewrules,everyonewasinformed,feltresponsibleforresults,
andtookcreditforthesuccess.
Butonceseveralagenciesareinvolved,high-levelsupportandinstitutionalbackup
becomeimportant."Oneofthemainreasonsforoursuccesswasthatthecommis-
sion operated under the presidency," remembers Mor�n. "We had support from
the highest political level. And since we were not directly affected by the reform,
Starting a Business CASE STUDY: EL SALVADOR
wecouldplaytheroleofmediatorordecision-pusherwhennecessary.Everybody
knewfromthebeginningthatthepresidentwasgoingtoopenthesinglewindow.
Thispushedthereformerstoworkevenharder.Andthankstotheattentionfrom
thepresident,therewaslotsofpublicity."
When dealing with several independent agencies, the weekly decision-making
meetingswithlegalandtechnicalrepresentativesfromtheagenciesmovedthepro-
cessalongandensuredthateveryonewasonboard.Sinceallmeetingsanddecisions
werewelldocumentedandfollowedup,therewasnoconfusionaboutwhathadto
bedone,whatwasexpected,andwhowasaccountable.Quantitativeindicators,such
asreducingtheresponsetimeforallformalitiesatthesinglewindowto5days,set
measurablegoals,whichgaveeveryoneacleardirection.
Constantcustomerfeedbackwascrucialinmeasuringsuccessandidentifyingwhat
wasstillmissing.Withclientsastheevaluatorsofperformance,theyquicklybecame
moreappreciated--andcustomer-orientationmorethanabuzzword.
Thereformersalsorealizedthatitwasnotnecessarytohavealladministrativede-
tailsreadytobeeffective.Withalittlecreativity,suchascuttingdownonthenum-
berofcopiesrequired,paperworkwasreducedbymorethanhalf,andthecenter
couldopenwithin3months.Tosavetimeandmoneyforbuyingnewequipment,
delegatessimplybroughttheirowncomputers.
Intheend,alltheeffortpaidoff.WhentheDominicanRepublic-CentralAmerica
FreeTradeAgreementcameintoeffectinMarch2006,ittook26daystostartabusi-
nessinElSalvador,fasterthaninChile,Belgium,orMexico,andmorethantwiceas
fastastheregionalaverageof73days.
Work still remains. Cost is still high, with 75.6% of income per capita in official
fees and 119.7% of income per capita paid before registering. Outdated legal re-
quirements remain, such as publishing an establishment notice 3 times in the of-
ficialjournalandanationalnewspaper,at3-dayintervals,insteadofsimplyonthe
registry'swebsite.Therulesandregulationswerefeltevenduringthereform."One
ofthebiggestchallengesduringthereformwasthelegalreviewtocheckwhether
anyregulationsexistedthatwouldbeviolated.Thankfully,wealwayshadthelegal
expertsineverymeeting,"saysMor�n.
Butwiththemomentumgainedfromthesuccessoftheadministrativereform,the
reformers have started tackling these more difficult legal changes. The company
codehasbeenreviewed.Amongtheproposedamendmentsarecuttingthemini-
mumcapitalrequirement,makingthepublicationofnoticeselectronic,andallow-
ing notaries, lawyers, and the commercial registry to legalize books to introduce
competitionandlowerthecostfortheservice.
How to double business entry in two years
TomJersildandZoranSkopljak
AtagovernmentpressconferenceinDecember2005SerbianMinisterforEconomy
and Privatization Predrag Bubalo said, "The Law on the Registration of Business
Entitieshasproducedfascinatingresults."On18January2006theSerbianBusiness
Registry Agency celebrated its first anniversary. At the ceremony Bubalo proudly
announced,"Duringthefirstyearofoperationtheregistrysetupalmost11,000new
companies,anincreaseof70%fromthepreviousyear."
Fordecades,startingabusinessinSerbiawastimeconsumingandburdenedwith
unnecessary bureaucratic hurdles--the rules inherited from the communist past
were not business-friendly. Some of the biggest problems: the $5,000 minimum
capital requirement for starting a limited liability company, the necessary inspec-
tionsbeforeacompanycouldstartoperating,andthecommercialcourtschecking
every document. Sixteen commercial courts were in charge of registering enter-
prises,and131municipalitiesdealtwithregisteringentrepreneurs.Thepracticewas
soinconsistentthatevenjudgesinthesamecourtrequireddifferentdocuments.As
onelawyersays,"Ihadtofilethesameformtothesamecourtin15differentways
depending on what judge handled my registration." There were even cases when
thecourtsrefusedtoacceptformsfilledoutelectronicallyandinsteadinsistedon
handwrittenmaterials.
ReportsfromtheU.S.AgencyforInternationalDevelopment(USAID),Deutsche
Gesellschaftf�rTechnischeZusammenarbeit(GTZ),theEuropeanUnion,andthe
WorldBankidentifiedbusinessregistrationasaseriousproblem.Andin2001�02
consensuswasgrowingthatsomethinghadtobedone.AreportfortheMinistry
of Economy and Privatization prepared recommendations for reforming Serbia's
enterpriseregistrationsystem.Thisreportbecamethebasisforreform.
Afterthedecisiontoreform,thedrivingforcebehindtheeffortwastheInter-min-
isterialWorkingGrouponDeregulation,whichlaterbecametheCouncilforRegu-
latoryReform.Itdraftedtheprimarylaws,coordinatedtheirimplementation,and
established the registry. Appointed in late 2002 by Aleksandar Vlahovic, the then
MinisterforEconomyandPrivatization,thegroupwasinchargeofdraftingtheLaw
ontheBusinessRegistrationAgencyandtheLawontheRegistrationofBusiness
Entities.Notallproceededsmoothly.InMarch2003theSerbianprimeministerwas
assassinated,andafterseveralmonthsofuncertaintyearlyelectionswerecalledin
December.Butthankstotheworkinggroup'senthusiasmandpersistence,continu-
itywasmaintained,andsignificantdelayswereavoided.
Changing the laws--and establishing the registry
Thereformhad2elements.Thefirstwasaradicalchangeofthelaws,andthesec-
ond was making the new system work in practice by establishing a new registry.
Threelawswereenacted--theLawontheBusinessRegistrationAgency,theLawon
theRegistrationofBusinessEntities,andtheCompanyLaw.Thefirst2established
theregistryandradicallychangedtheprocedureforstartingcompanies.Theyalso
movedtheprocessfromcommercialcourtsandmunicipalitiestothenewadmin-
Starting a Business CASE STUDY: SERBIA
istrative agency, unburdened by old habits and inertia. Using the Irish system as
amodel,thesystemwascentralizedandaccessibleviatheInternet,leadingtofar
greaterlegalcertainty.Asoneattorneysays,"NowIcancheckinafewminutesifa
companyexists,whatistheaddress,andwhoisauthorizedtorepresentthem.Be-
fore,Ihadtogotothecourtforeachinquiry."
Another very important change was the deadline of 5 days to register a company.
Ifnodecisionismadein5days,theapplicantisfreetobeginoperations("silence
isconsent").Thiswasabigchange.PreviouslyunderSerbianlaw,thedecisionwas
negativeiftherelevantadministrativebodydidnotrespondintheprescribedtime.
Forthecompanylaw,too,ratherthanamendtheoldlaw,anewonemoresuitable
foramarketeconomywascreated.Thenewcompanylawreducedtheminimum
capitalrequirementforlimitedliabilitycompanies(90%ofallcompaniesinSerbia)
from$5,000to500andeasedrequirementsforestablishingcompaniesbymaking
therulesmoreflexible.
Out-maneuvering opponents
TheworkinggrouporganizedworkshopswithofficialsfromIrishandItalianbusi-
nessregistriestoproducereformprinciplesforthegovernment.And3publicdis-
cussionswereorganizedwithstakeholdersafterthelawsweredrafted.Thecritical
moment was when the government adopted "The Principles" in April 2003. Vla-
hovicandMinisterforInternationalEconomicRelationsGoranPiticwerethemain
supporters, while the Ministry of Justice was the main opposition. The principles
describedthemainpolicyobjectivesofthereformsandconcretestepsforimple-
mentation.AndrejaMarusic,theleaderoftheworkinggroup,pointedoutthat"by
adoptingtheprinciples,thegovernmentgavepoliticalbackingtotheexpertwork
wedidandsilencedlotsofopposition."
Theoriginalplanwastohavethenecessarylegislationinplacebymid-2003,and
theregistryoperatingbythebeginningof2004.Buttheassassinationoftheprime
ministerinMarch2003andsubsequentelectionsdelayedtheregistry'sstartupuntil
January2005.
ThebiggestopponentsofthereformswerethecommercialcourtsandtheMinistry
ofJustice,whichtriedtostalltheprocessandpersuadepolicymakerstokeepbusi-
ness registration in the courts. Business registration was a large source of power
andinfluenceforcommercialcourts,andsotheyopposedremovingitfromtheir
activities.TheSerbianChamberofCommerceandtheNationalBankofSerbiaalso
wanteditundertheircontrol.Thankstothepersistenceoftheworkinggroupand
latertheCouncilforRegulatoryReform,thereformwasimplementedasenvisaged
atthebeginning.Almostallfacetsofthelawwereincludedinthefinallanguage.
ButtheMinistryofFinanceandTaxAdministrationretainedcontrolofissuingtax
identificationnumbers.
Starting a Business CASE STUDY: SERBIA
Thenewcompanylawfacedmuchlessopposition.Fromthebeginningtherewas
aconsensusamongpolicymakers,thebusinesscommunity,andacademicsonthe
need for change. Foreign experts, mostly funded by USAID, helped early in the
processandatsomecrucialmoments,butlocalexpertsdidmostofthework.Even
thoughadoptingthenewcompanylawwasmuchsmootherthanestablishingthe
registry,limitedpublicdebateleftsomedeficiencies.Oneisthattheminimalcapital
requirementforalimitedliabilitycompanywasnotreducedenough.
Costs of reform--about 2 million
Whilethecompanylawwasmostlypreparedbylocalexperts,internationaldonors
wereimportantsourcesoffinancing.InApril2003theSerbiangovernmentadopted
theprinciplesofreformintheJacobsReporttomeetconditionsforaWorldBank
loan.In2004donorsincludedreformofbusinessregistrationinthelistof10priori-
tiesforthenewSerbiangovernment.Thebiggestcontributionswere1.4 million
fromtheSwedishInternationalDevelopmentAgencyand$150,000fromUSAIDfor
computers.TheWorldBankfundedagreatdealofconsultancywork,andMicrosoft
Corporationdonatedprovisionalsoftwarefortheregistryandotheressentialand
timely support. The total cost of reform was about 2 million ($2.3 million). The
registryisnowfullyself-financing.
Implementingthisreformwasnoteasy.Anewinstitutionhadtobeestablishedand
a new system implemented. Having a core group of professionals in the working
groupandtheCouncilforRegulatoryReformenabledcontinuityduring2different
governmentsandfreedthereformfrompoliticalinfluence.Butthispoliticalneu-
tralitywassometimesdamagingbecausepoliticianswerenotfullycommitted.
Afterthelawswereadopted,itwasrealizedinthesecondpartof2004thatsoftware
andhardwarepurchaseswouldnotbemadeintime.AsAndrejaMarusicfromthe
Council for Regulatory Reform describes, "It was clear that we were running out
oftime.Wehad2options--topostponethestartoftheregistryforayearandrisk
furtherdelays,compromisingthereform,ortostartasplannedandtrytofixthe
problemsastheycame."Thedecisionwastocontinuewithstartingup.Theregis-
trybeganoperationsatthebeginningofJanuary2005andayearlaterbecamethe
country'sonlyaddressforbusinessregistration.
Aftertheregistrystartedthebiggestchallengewasre-registeringexistingcompanies,
almost70,000ofthem.Itwasabigworkload,andthecommercialcourtsobstructed
theprocess.Inaddition,thefacilitiesweretoosmall,butthiswillbefixedin2007
whentheregistrymovestonewfacilities.
Starting a Business CASE STUDY: SERBIA
Immediate effects--from 51 days to 18
Theeffectsofthereformwerefeltalmostimmediately.Thetimenecessaryforstart-
ingabusinesswasreducedfrom51daysin2004to18in2005.Thenewsystemwas
aradicalchange,withafocusoncustomerserviceanduserfriendliness.Andthe
formsforregistrationarebeingcontinuallyimprovedtoreducethetimetocomplete
them. After the very decentralized and inconsistent practices of the commercial
courts, the new system is centralized, with internet access to all registration data.
Tounifypracticesonly1person--theregistrar--hasfinalauthorityandthepower
tointerprettherelevantlaws.Thisincreaseslegalcertaintyanduniformityacross
theboard.
Duringitsfirstyear,theSerbianBusinessRegistryAgencyregisteredalmost11,000
newcompanies,70%morethanin2004,shrinkingtheinformalsector.In2years,
thenumberofregisteredbusinessesmorethandoubled.Praisehasbeenhigh.One
attorney says, "Since the registry started operating I did not have to appeal at all
againsttheirdecisions,whilebeforeIhadtodoitveryoften."
If it had to be done again
IfSerbiahadtodoitagain,itwouldadopttheprinciplesofreformearliertoprevent
delays and limit opposition, especially from the courts and the Justice Ministry.
If reform implementation is assigned to a professional nonpolitical body, chances
increase significantly that the reform will survive governmental or other political
changes.Assigningreformcoordinationtoaninter-ministerialworkinggroup,such
astheCouncilforRegulatoryReform,accommodatedvariousministriesthatmight
otherwisehavebeeninconflict.
Reforms should not be delayed because not everything is completely determined
aheadoftime.Ifthereformprocesstakestoolong,theriskistolosemomentum.
Manyissuesarebetteraddressedduringtheprocess.
Creatinganentirelynewinstitutionwithnewspecially-trained,morecapable,and
well paid staff, while somewhat extreme, helped avoid the legacy of prior institu-
tions.OtheroptionsforanewSerbianbusinessregistrationsystemwerebasedon
modifyingexistinginstitutionsandprocedures,butitisdoubtfulthattheywould
havebroughtabouttheneededchange.
Coordinationwithotherreformsandlegislativechangescouldhavebeenbetter.For
example,itisnotpossibletofileregistrationdocumentselectronicallybecausethe
LawonElectronicSignaturesisnotinplace.Andotherlawsadoptedwereincom-
patiblewiththerulesforregisteringabusiness.
Oncethesystemisworking,processimprovementsshouldcontinuetoeliminatede-
lays.Andeventhoughitwasoriginallyplannedtohavetaxidentificationnumbers
attheregistry,thisstillisnotpossible.TheTaxAdministration,moresophisticated
and sensitive to various forms of tax fraud, is now scrutinizing tax identification
Starting a Business CASE STUDY: SERBIA
numberapplicationsmoreclosely.Butitslegitimateconcernsfortaxfraudshould
notdelaybusinessregistration,socontinuingeffortsarenecessarytoimprovecoop-
erationbetweenthecompanyregistryandotherrelevantagencies.
ThebusinessregistrationsysteminSerbiacouldbeimplementedinothercountries.
TheSerbiansystemisnotuniqueandwasdesignedwithEuropeanbestpracticesin
mind,theIrishmodelinparticular.TheSerbianexamplecouldbeespeciallyvalu-
able for neighboring countries, which share similar problems and challenges. For
example,inJanuary2007theSerbianBusinessRegistryAgencyorganizedawork-
shopforBulgariancounterpartswhoareworkingontheirnewregistrationsystem.
0
Employing Macedonia's youth
AdamLarson,KirilMinoski,andJanetMorris
ThenumberofjobcontractsconcludedinMacedoniaincreased5.9%forJanuary�
October2006oversameperiodayearbefore,witha30.6%increaseforfixed-term
contracts--impressivegainsforacountrywhereunemploymenthoveredabove30%
throughoutthe1990s,partlyduetorigidemploymentlaws."[Macedonia]wanted
flexibilityandwegotit,"saysonelocaleconomist.
MacedoniapassedtheLaborRelationsActon22July2005,thefirstsignificantlabor
law reform since 1993. Major reforms in labor and employment law are uncom-
mon--largelybecauseoftheextraordinarypoliticalwillrequired.Changinglabor
lawscaninspirestrongreactionsfromemployersandemployeesalike,ofteninvery
different ways. Emotions can run high, with labor laws affecting something that
bothcareabout:theirlivelihoods.
With Macedoniasuffering fromchronicallyhighunemployment,thegovernment
decidedin2003thatitwastimeforamajorreform.Partofthecurewasanewlabor
law that could better respond to the economy's needs. Passing the new law was a
success for 2 key reasons. First, representatives of both employees and employers
took part in the reform process. Each side had a voice, and neither felt excluded.
Second,thenewlawenjoyedstrongpoliticalsupportfromboththegoverningand
oppositionpartiesinparliament.
Whileemployersandemployeesdisagreedonsomeissues,theyagreedthatastrong
economywithlowunemploymentwasagoodthing.Withthatasastartingpoint,
thegovernmentwenttowork.
Chronically high unemployment
Macedonia hadgrappledwithrisingunemploymentfordecades.Theproblemwas
oneofitsmostpressingsocialissues.RegisteredunemploymentinMacedoniahad
beenrisingsincetheearly1960s,topping20%inthe1970s.By1991,whenMace-
doniagainedindependencefromYugoslavia,theeconomyhadbeencontractingfor
morethan6years,andunemploymentwasabout24%.
High unemployment hit Macedonia's youth and women especially hard. A 2003
studyfoundthatnearly30%oftheunemployedwerebetweentheagesof15and24.
In2001only32%ofMacedonianwomenofworkingagewereemployed,muchless
than51%intheEuropeanUnionand54%inOECDcountries.Nearlytwo-thirds
ofthepeoplelookingforworkhadbeenwithoutajobforatleast4years,andthere
wasevidencethatmostofthemwereyoung.
Fighting the problem at its source--the law
NumerousfactorscontributingtoMacedonia'ssoaringunemploymentwerebeyond
the country's control, but reforming Macedonia's labor law was a significant first
step in combating unemployment. The Labor Relations Act of 4 December 2003
wasprincipallybasedona1993law(theLaborRelationsActof27December1993),
writtenmainlywithsociallyownedandstate-ownedenterprisesinmind.Thegov-
Employing Workers CASE STUDY: MACEDONIA
ernmentsetouttopassanewlawtoaddressthechangesinMacedonia'seconomy.
Reformsfocusedon4keyissues.First,legislatorsintroducedmoreflexibilityinthe
typesoflaborcontractspermittedandclarifiedthelanguageofprovisionsgoverning
part-timeandfixed-termcontracts.Second,theybuiltmoreflexibilityintoovertime
provisions.Third,theysimplifiedredundancyprocedurestomakecomplianceeasier
andlesscostly.Fourth,theymadechangestothecollectivebargainingframework,
includingthosetocomplywithInternationalLaborOrganizationstandards.
Making the reform happen
WhentheSocialDemocraticUnionofMacedoniawonparliamentaryelectionsin
2002,withBrankoCrvenkovskiasitshead,oneofitskeyelectionpromiseswasto
createjobs.AlthoughBrankoCrvenkovskilefthispositionasprimeministertobe-
comepresidentin2004,thepartyremainedinpowerthroughoutthereformprocess
thatledtoanewlaborlawin2005.
Aside from combating unemployment, the Macedonian government needed to
reform its labor laws before it could join the European Union, after applying for
membership in March 2004. The European Council Decision of 22 July 2003 set
guidelinesthatcalledformemberstatestopromoteemploymentpoliciesthatwould
encouragejobcreation.Itsetthegoalofreachinganemploymentrateof70%by
2010.Italsocalledformembercountriestopromotejobcreationbyimprovingthe
adaptabilityofworkersandfirmstoeconomicchangesandrestructuring--andby
transformingundeclaredworkintoregularemploymentthroughmeasurestoelimi-
nateundeclaredwork.
WorldBankeconomistArvoKuddoadvisedthegovernmentthroughoutthereform
process.HestartedinSeptember2004bypreparinglistsofkeyreformobjectives
andproposingpossiblesolutionstothegovernment.ThenbetweenNovember2004
andJanuary2005,laborandemployerrepresentativeshadtheopportunitytoexpress
theirviewsonthekeyobjectivesthroughwrittenproposalstothegovernment.
InJanuary2005meetingstookplacebetweenofficialsfromtheMinistryofLabor
and Social Policy and several "social partners" (employers associations, trade
unions,andotherinterestgroups).Thiswasacrucialstep.Participantssharedtheir
perspectives, voiced their concerns, and worked to hammer out a compromise. In
March2005theMinistryofLaborheldadditionalconsultationssothatthevarious
groupscouldprovidefurtherinputonthedraftlaw.ThroughoutAprilandMaythe
partieshotlydebatedarangeofreformproposals.
Laborunionswereatfirstdeeplyopposedtothereform.Butoncetheywerebrought
intothereformprocessandgivenavoice,theyworkedwiththegovernmentand
employer representatives to negotiate compromises. Key to making the process
workwasincludingtheunionsinthedrafting,ratherthancraftingalawwithout
theirinput.ThroughsustainedinteractionwiththeMinistryofLabor,theunions
Employing Workers CASE STUDY: MACEDONIA
FIGURE 4
Timeline of labor law reform in Macedonia Source: Doing Business database.
JUL OCT JAN APR JUL
EARLY 2004
Labor ministry begins drafting
new labor law.
FALL 2004 Macedonian government debates reform proposals.
First reform proposals.
WINTER 04/05
Labor and employer representatives submit written proposals
on desired provisions.
JANUARY 2005
Second reform proposals. Focus group meetings with social partners.
FEBRUARY 2005
International labor experts provide technical comments on draft.
SPRING 2005
Labor Ministry holds extensive consulations Unions' support is won.
with social partners.
MAY 5, 2005
Government submits the draft labor law to parliament for rst reading.
JULY 4, 2005
Government submits the draft labor law to parliament for second and nal reading.
JULY 22, 2005
New law is adopted by parliament.
AUGUST 5, 2005
New law enters into force.
cametorealizethatreformhelpseveryone.Thenewlawwaspassedwithoutdisrup-
tivestrikesthatmighthaveimpededthereformeffort.
Thereformenjoyedsupportacrossthepoliticalspectrum.Infact,thegreatestsur-
prise was probably the ease and speed of parliament's passing the new law. With
unemploymentsopersistent,theoppositionpartymadeapointofnotchallenging
thelegislation,andmostparliamentariansgenuinelyfavoredreform.Anditstotal
costwasminimal,becausetherewerenodirectcosts,simplythetimededicatedby
staffoftheMinistryofLabor.
Thegovernmentfirstsubmittedadraftofthelawtoparliamenton5May2005,and
by22Julythefinalversionwaspassed.On28JulytheLaborRelationsActof22July
2005waspublishedintheOfficialGazetteoftheRepublicofMacedonia,entering
intoforce8dayslateron5August2005.
Introduce flexibility, streamline, and clarify
The2005laborlawcreatednewandmoreflexibleoptionsforlaborcontracts,clari-
fiedandliberalizedovertimeprovisions,limitedtheeventsthatqualifiedforpaid
leave,andstreamlinedredundancyprocedures.Italsoredefinedtheframeworkfor
collectivebargaining,clarifyingseveralrulesandlimitingthedurationofcollective
bargainingagreementsto2years.
Employing Workers CASE STUDY: MACEDONIA
Underthepreviouslaborlaw,somearticleswereambiguous,evenaboutwhattypes
of contracts they purported to regulate. The new law clarified the rules applying
to fixed-term and part-time contracts, and promoted more diverse employment
relationships by loosening restrictions on the use of fixed-term, temporary, and
part-timeemploymentcontracts.Article46,forexample,cappedthetotallengthof
fixed-termcontracts(includingrenewals)at4years,upfrom3.
Previously, overtime was allowed only under exceptional circumstances, such as
fires and epidemics. Under the new law overtime was no longer limited to those
cases.Weeklyovertimewaslimitedto10hours,annualovertimeto190hours,with
lowerlimitsforminors.
Theoldlaborlawrequiredemployerstonotifyastateemploymentagencyeachtime
acontractwasterminatedduetoredundancy.Severancecostswerehighevenbyre-
gionalstandards,withthemaximumpaymentsetat8monthlysalaries.Thenewlaw
relaxedpreconditionsforvalidredundancydismissalsandlimitedmaximumsever-
ancepayto6monthlysalaries.
The collective bargaining framework under the old labor law violated ILO stan-
dards.Convention144onTripartiteConsultationrequiredthatrepresentationby
socialpartnersbevoluntaryandthatcollectiveagreementsbindonlypartiestothe
agreement.ButMacedonia'scollectiveagreementsboundtheentirepublicandpri-
vatesectors,evenworkerswhoserepresentativeswerenotpartiestotheagreements.A
singlechamberofcommercerepresentedallemployers,whetheranemployerwanted
toberepresentedbyitornot.Tocomplicatematters,thelawdidnotprovideclear
rulesdefiningwhichpartieswerequalifiedtorepresentemployersandemployeesin
negotiatingcollectiveagreements,anditplacednolimitsonthedurationofacollec-
tivebargainingagreement.
The new law made membership in trade unions and employers' associations vol-
untary.Itlaiddownrulesfordeterminingwhichpartiesmayrepresentemployers
and employees in negotiating collective agreements. And the law made collective
agreements binding only for signatories and members of signatory organizations.
Inaddition,itlimitedcollectiveagreementstoafixed2-yearterm,makingregular
renegotiationnecessary.
Improving opinions--an important first step
Forthegovernment,thepassageofthe2005laborlawwasagreatsuccess.Andun-
derstandablyso:tohavesmoothlyadoptedareformofsuchbreadthwasnosmall
feat,especiallywiththedivergenceofviewsamongthepartiesinthediscussions.
Employersandemployeesalikearepleasedwiththeflexibilitythenewlawbrought
toemploymentcontracts."Iconsiderthelawpositive,"notesSlagjanMihajlovski,
owner of Infinite Solutions, a software development company with 20 employees,
"becausemanyoftheobstaclestoflexibleformsofemploymenthavebeenelimi-
Employing Workers CASE STUDY: MACEDONIA
nated."MilivojeDzordevic,theowneroffx3x,avisualeffectsandanimationcom-
pany with 20 employees, agrees, "My opinion of the labor law is positive, since it
allowsmeflexibleformsofemployment[whichare]essentialforthenatureofmy
project-orientedbusiness.Thisissomethingthathasadirectimpactonthecompet-
itivepositionofmycompany."Twenty-year-oldMarkoCulev,apart-timeemployee
atthecompany,adds,"[It]allowedmetohaveapart-timejob,sinceIcouldwork
only4hoursadayduetomyvariousotherresponsibilities."Heandotheremployees
wish, however, that a public awareness campaign had brought the changes in the
laborlawtothegeneralpublic'sattention.
Some employers and employer representatives feel that more reform is needed,
though they consider the new labor law a move in the right direction. Valentino
Konstantinovski, owner of Etapa Project, an architecture and engineering firm
with 6 employees, is pleased that the new law "shortens employment and redun-
dancy procedures," but considers it "just the first step for establishing the overall
frameworkthatwillsupportthegrowthofsmallandmediumenterprises."Darko
Velkov,ownerofaprivateemploymentagencyfortemporaryworkers,Vrabotuvanje
Leasing,andmanagerofthelargestprivateemploymentagency,Vrabotuvanje.com
(meaning "Employment.com") agrees, "[T]he new Labor Relations Act is a small
movementinapositivedirection,butitisjustthefirststepintheadjustmentofthe
legislationtothelabormarketneeds."MileBoskov,presidentoftheConfederation
of the Employers of the Republic of Macedonia, bluntly says that he supports an
"ongoingprocessofregulatoryguillotine."
Unions and employer organizations disagree over some of what they feel is good
about the labor law. Labor unions emphasize that greater worker protections are
needed,whileemployerorganizationsliketheEmployers'OrganizationoftheRe-
publicofMacedoniacomplainthatthelawisstilltooburdensomefortheemployer.
Whilethequalityofthelegislationwashigh,thelawwastheresultofacompromise,
andassuch,itprobablyfitnoone'sideal,"Thelawisnotperfect,butunderthecir-
cumstancesandthecompromisesthathadtobemade,itwasasuccess."
Butonepointwherebothunionsandemployerrepresentativesagreeistheircriti-
cismoftheminimumrequiredbythenewlawforrepresentingemployersandem-
ployeesincollectivebargainingnegotiations.AccordingtoArticles212and213of
thenewlaw,totakepartinthenegotiationsonacollectiveagreement,unionand
employerorganizationsmusteachrepresentaminimumof33%ofthetotalnumber
ofemployeesandemployers,respectively,coveredbythecollectiveagreement.
Theprobleminsomesituationsisthatnorepresentativeorganizationcanmeetthis
threshold.Whilethisisnotanobstacletocollectivebargainingatthefirmlevel,it
isatthenationalandbranchlevel.BecauseMacedoniadoesnothaveatraditionof
firm-levelbargaining,bargainingcanshifttothefirmlevel,orunionscanconsoli-
datetojoinforces.Ironically,thehighthresholdwasproposedbythedominantunion
asawaytoprotectitsposition.Thestrategybackfired,however,becauseevenitfails
tomeetthethreshold.
Employing Workers CASE STUDY: MACEDONIA
Lesson--include social partners in the dialogue
Themainlessonforothercountriesisthatsocialpartnersneedtobeincludedinthe
draftingprocessatanearlystage.Unions,chambersofcommercerepresentingem-
ployers'interests,andgroupsofbusinessexecutivesallparticipatedindiscussions
leadinguptothe2005reform.Thisgavethemavoiceandanopportunitytohave
theirinterestsaddressed,whichledtobroadacceptanceofthenewlaw.
Groupsincludedinthetalksareclearlymoresatisfiedwiththereform'soutcome.
AcoSpasevskioftheMacedonianChamberofCommerce,representingtheinterests
ofsmall-andmedium-sizeenterprises,calledthereformprocessa"positiveexperi-
ence"andmadeapointofemphasizingtheconcreteresultsofconstructivecoopera-
tionwiththegovernment.
Impact of the reform--an early indication of positive results to come
Giventhatthenewlawmakesiteasiertoformflexiblelaborcontracts,itwouldnot
besurprisingtoseeanincreaseinredundanciesintheshortterm,followedbyan
increaseinthenumberoffixed-termandpart-timecontracts.Butlayoffshavenot
materialized.Macedoniawillneedtoexperiencebothaperiodofeconomicexpan-
sionandoneofcontraction(afullbusinesscycle)beforetheeffectsofthereform
materialize.
Anearlyindicationthatthereformisworkingistheriseinemploymentofyouths
ages15�24.Inthesecondquarterof2006(themostcurrentlaborstatisticsavail-
able)ascomparedwiththesamequarterinthepreviousyear,employmentrose4
percentage points (from 13.4% to 17.4%) and unemployment fell 5.2 percentage
points (from 59.8% to 54.6%). Because young people are the group most actively
lookingforwork(astheyarejustenteringtheworkforce),theyaremostlikelytobe
affectedbythereformintheshortrun.
WilltheresultsofMacedonia'slaborreformcontinuetobepositive?Theearlysigns
areencouraging.The2005laborlawwasacriticalmovetowardreducingunemploy-
ment.Byconsultingwithlaborlawexperts,buildingbroad-basedpoliticalsupport
for the new legislation, and creating an effective dialogue with social partners,
Macedoniahasmovedpastanobstaclethatimpedesmanycountries.
Protecting investors from self-dealing
MelissaJohnsandJeanMichelLobet
AflukeoftiminghelpedMexicooverhaulitssecuritieslaws."Wefinisheddrafting
thebillinMarch2004,toolatetosubmittoCongressthatterm.Butinsteadofshelv-
ingituntilOctober,wedecidedtoshowittopeopleintheprivatesector,"relatesa
keydrafterofthenewlaw."Theirinputmadeallthedifference."
Persistent underperformance
In2004Mexico'ssecuritiesmarketwasatinyfractionofwhatwouldbeexpected
from the size of its economy. The Republic of Korea's gross national income was
similar($600�$700billion)butithad10timesmorelistedfirms.Chinahadase-
curitiesmarketwith4timesthecapitalofMexico's.LatinAmericareceived9%of
globalprivateequityflows,butMexico,withmorethanathirdoftheregion'sin-
come,receivedonlyatenthofthat.Andmorecompaniesweredelistingratherthan
issuingnewsharesontheMexicanstockexchange.Investorslookingformarkets
withthegreatestliquidity,transparency,andshareholderrightswerenotinvesting
inMexico.
Why? Antiquated securities laws and tightly controlled companies gave minority
investorslittleassurancethattheirrightswouldbeprotected.In2004,Mexicohad
only150companieslistedonthestockexchange,with60%ofthemcontrolledby
a single shareholder. A diagnostic report by the World Bank identified a number
of weaknesses in the legal framework, including a lack of definition for directors'
responsibilitiestowardthecompany.Thelawalsohadnorequirementthatsubsid-
iariescomplywiththecorporategovernancerequirements,sonotsurprisinglymany
listedcompanieswereholdingcompanies,withsubsidiariesoperatingoutsidethe
fullcorporategovernanceregime.Itwasdifficultforminorityshareholders--orany
outsiders--toverifymanagers'financialconduct.
Theresult:insiderdealswerefrequent,channelingwealthoutofthecompanyinto
thecontrollingshareholders'pockets."TherewasasayinginMexico:richbusiness-
men,poorcompanies,"saysonereformer.
An opportunity to reform
TheFoxadministration'ssuccessinotherfinancialsectorreformsbuoyeditshopes
toimproveMexico'ssecuritieslaws.Accordingtoonegovernmentofficial,"Earlier
financial sector reforms were not very charged politically." Securities regulations
wereseenasanotherstepintheadministration'seffortstoreformMexico'sfinancial
markets.Congressionalchampionsofreformwerealsovocal:onecongresswoman
challengedtheministeroffinancetoattackvestedinterestsinthesecuritiesmarkets,
tauntinghimwiththelabel"ministerofstagnation"ifhefailedtopushsecurities
reform.
ThehighlypublicizedEnronandWorldComfinancialscandalsintheUnitedStates
gaveMexicanpolicymakersanotherpoliticalopportunitytopushthroughtheircap-
italmarketreforms.Ratherthanrewriteexistinglegislation,theMinistryofFinance
Protecting Investors CASE STUDY: MEXICO
decidedtodraftacompletelynewact.Thegoal:greaterMexicancompetitivenessin
theglobalcontestforfunds.
"Mexicohasahugeneedandabigappetiteforcapitalinvestment,"saysonepart-
neratatopMexicanlawfirm.Mutualfunds,pensionfunds,andforeigncapitalin
search of new destinations for investment had so far avoided Mexico. "There are
fundsinMexicotogoaround.Butwithoutprotection,peoplewon'tinvestlocally."
A small drafting team
Theoriginaldraftingteamforthenewlawwassmall:aseniorMinistryofFinance
official,aseniorofficialfromtheComisi�nNacionalBancariaydeValores("CNBV,"
Mexico'ssecuritiesregulator),alawyerfromeachoffice,and2outsidelawyers.They
startedwithaconceptualbasedraftedinOctober2002andworkedthrough2003
writingthenewlaw(figure5).OnlyinFebruary2004didtheycompleteafulldraft
forinternalreview.Amonthandahalflater--ayearandahalfafterbeginning--the
jointteamwasreadytopresenttheproposedlawtoCongress."Wethoughtwewere
done,butitwasonlythebeginning,"saysonememberoftheteam.
The reform team's timing was off. In March 2004 Congress had only a few weeks
until the end of the session. It was too late to submit such a large and important
pieceoflegislation.ButratherthanwaitingtounveilthebillinCongressandwork
FIGURE 5
Timeline of investor protections reform in Mexico Source: Doing Business database.
2003 2004 2005 2005
� � JAN � � � � � � � � � � � JAN � � � � � � � � � � � � JAN � � � � � � � � � � DEC
1. Min. of Finance and securities
regulator (CNBV) create Enron scandal in the U.S. provides political opportunity for reform
reform team
2. Reform team drafts new 6-person team is shielded from
securities law internal politics while drafting
3. Internal discussions within Min. of Finance and CNBV to nalize draft law
4. Private sector representatives review proposed law 1st draft distributed during summer congressional break
5. Reform team and private sector lawyers meet weekly to revise law
2nd draft distributed at Christmas
6. Second version of proposed law distributed, debated congressional break
7. Government presents draft law to congress
8. Supporters lobby for passage Finance minister speaks out against amendments
that would dilute the new regulations.
Amendments fail.
9. Congress debates and passes law
10. 150+ meetings with accountants, regulators and lawyers to discuss reforms
Protecting Investors CASE STUDY: MEXICO
through any opposition there, reformers took a novel approach: they invited the
relevant stakeholders to review a "pre-draft" and participate in shaping it before
submittingthebilltoCongress.
Thisprocesstook2steps.First,reformersmetwitheverygroupthatwouldbeaf-
fectedbythenewlegislation(businessassociations,financeprofessionals,theMexi-
canbar,thestockexchange,andlistedcompanies)topresentthegoalsofthereform.
These goals were to strengthen the Mexican stock market through 1) new listed
firmsand2)higherdemandforMexicanfirms'stock.Asthegovernmentofficials
explained,thelawsoughttoaccomplishthisthrough3approaches:1)streamlined
regulations for listing a new company; 2) increased transparency and minority
investorrights;and3)acorporatestructureforlistedcompaniesthatmoreclosely
reflectedinternationalbestpractices.
Second,afterthepresentationsthereformersinvitedagroupofprominentprivate
sectorlawyers,representativeofallthegroups,toformadraftingcommittee.This
committeewouldgothroughtheexistingbill--keepingthegoalsforthelegislation
inmind--andeliminateanyambiguities,contradictions,andloopholesthatmight
befoundinthe"pre-draft"text.
Ministry of Finance and CNBV officials met with representatives of top Mexican
law firms every Thursday evening between 5pm and 8pm, April to September. "I
callthemthe$15,000meetings[theamounttheattorneyswouldtypicallychargefor
theirtime].Intheend,wecompletelyrewrotethelaw.Andthefinalproductmetour
goals--greatertransparencyofpubliccompanyoperationsandbroaderprotection
ofminorityshareholderrights,"saysoneofficial.
The political battle
Thepoliticalbattlecamenext.ThenewdraftwassubmittedtoCongressinOctober
2004. Although its prospects were uncertain down to the final vote, it ultimately
passedinsubstantivelythesameform1yearlater.
OneofthebiggestmediaconglomeratesinMexicowasthemostvocalopponentof
thebill,protestingtheminorityshareholderprotectionsandthedisclosureprovi-
sions.ThegroupalsoarguedthatthenewlawwastoosophisticatedforMexicoand
toocloselymatchedtheUnitedStates'Sarbanes-Oxleylegislation.
Atonepointitseemedthereformeffortwouldfail.InNovember2005theMinistry
ofFinancemadeanall-outefforttoshepherdthedraftsecuritieslawthroughCon-
gress.Butopponentsofferedamendmentsthatwouldaffect4keyprovisionsofthe
bill--amendmentsthatwouldevisceratethelaw'sinnovativeprotections.Andthe
opponentswereadeptatusingtheiraccesstotheMexicanmediatosquelchsupport
forthebill.
TohelpmakethecaseforthecompletelawwithoutamendmentstotheCongress,
FinanceMinisterDiazpulledintheWorldBank'sDoing Business team.Diazasked
Protecting Investors CASE STUDY: MEXICO
theteamtouseits"protectinginvestors"indicatorstobenchmarkthedraftsecuri-
tieslawproposedbythegovernmentagainsttheexistinglawandagainstthewa-
tered-downalternative.
Theresultswerestriking.Undertheexistinglaw,Mexicoranked125of145countries
measuredbytheDoing Businessinvestorprotectionindex,withsomeoftheweakest
protectionsintheworldforminorityshareholders.AmongLatinAmericancoun-
triesmeasured,onlyHondurasandVenezuelahadweakerinvestorprotection.
If Mexico passed the law as presented by the Ministry of Finance, Mexico would
shootuptherankingindex92spots--to33."Sincewe'rethe20thlargesteconomyin
theworld,wethoughtweshouldberankedaround20ontheDoing Businessrank-
ings.Butevenwiththeimprovement,westillhoverinthe30s.Westillhaveworkto
do,"saidoneMinistryofFinanceofficial.Underthealternativelaw,Mexico'srank
wouldfallto132.
Disclosure and director liability--two key provisions
The difference hinged on disclosure and FIGURE 6
director liability provisions. The law pro- Protecting investors in Mexico--
big improvements
posedbythegovernmentstrengtheneddis-
Doing business indicator score (0�10)
closurerequirementsfordirectorswhoface 8
aconflictofinterestintheirdealingswith
the firm. It also broadened the company's 6 6 New law
responsibility to report any transactions 5 Old law
withcompanyinsiders.Andthelawmade
it easier for shareholders to hold directors
3
accountable for actions harming the com-
pany. Mexico's performance on the Doing
Business "extentofdisclosureindex"under 0
theproposedlawwouldincreasefrom6to Extent of Extent of Ease of
8(onascaleof0to10),anditsscoreonthe disclosure director shareholder
liability suit
"extentofdirectorliability"wouldrisefrom
0to3(figure6).
Withtheproposedamendments,however,Mexico'sperformanceonthe"extentof
disclosureindex"wouldslidebackwardssignificantly.Theopponents'billremoved
allrequirementsforacompanytoreportlargetransactionswithadirectororcon-
trolling shareholder immediately to the marketplace and in the annual report. It
alsoremovedanyobligationforthedirectororcontrollingshareholdertodisclosea
conflictofinteresttotheboard.
Minister Diaz presented these results to Congress, along with myriad other rea-
sonstopassthenewlawuntouched."Thesimulationsstirredenormousinterestin
CongressandinthemediabyshowingthedramaticdifferencesinMexico'sbusi-
ness environment if the law were not adopted," says one of the bill's proponents.
0
Protecting Investors CASE STUDY: MEXICO
"Ifapprovedasproposedbythegovernment,thenewlawwouldenhanceinvestor
protectionandfosterinvestmentinpubliclytradedandevenprivatelyheldcompa-
nies.Butifthechangesproposedbytheoutsidegroupwereaccepted,theopposite
wouldhappen."
Thebillpassedthelowerchamberwithouttheamendmentson6December2005
and was confirmed by the Senate a few days later. Heads of manufacturing and
investment companies lobbied for its passage, thanks to the tireless work of the
reformerstoworkwithlocalbusinessleadersandtheircounselwhiledrafting.The
newlaw(LeydelMercadodeValores)cameintoeffect28June2006.
What does the new law do? Attack self-dealing
TheLeydelMercadodeValores:
� Definesclearlythedutiesofcompanydirectors.
� Heightens disclosure requirements for related-party transactions (transactions
involvingaconflictofinterestwithacompanyinsider).
� Requirescommitteesofindependentboardmemberstoreviewexecutivecom-
pensationandrelated-partytransactionsinpubliclytradedcompanies.
� Lowerstheownershipthresholdforminorityshareholderstosuefordamages.
� FormallyestablishesthesubpoenapowerofMexicanregulators.
� Increasescriminalpenaltiesforcorporatecrimes.
Thelawattackedself-dealing.Previouslegislationgaveboardmembers,directors,
andshareholdersbroadandimpreciseresponsibilitybenchmarks.Thenewlegisla-
tionpresents2distinctdutiesfortheboardofdirectorsofapubliclyheldcorpora-
tion.
First,adutyofcare.Boardmembersmustfulfilltheirdutiesingoodfaithandplace
thebestinterestsofthecorporationandtheentitiescontrolledbyitabovetheirown
personalinterests.Theymustattendboardorcommitteemeetingsanddiscloseall
informationnecessarytomakedecisions.
Second,adutyofloyalty.Thisdutyforbidsdirectorsandindividualswithdecision-
making authority over the corporation from diverting to themselves or to other
personsabusinessopportunitythatbelongstothecorporation,withoutalegitimate
cause.Theycannotfavorashareholderorgroupofshareholdersattheexpenseof
others.Norcantheyvoteonissuesinwhichtheyhaveaconflictofinterest,ormake
inappropriateuseofprivilegedinformation.Beyondthesebroadfiduciaryobliga-
tions, the law provides a nonexhaustive list of activities considered disloyal and
behaviorsthatconstitutealackofdiligence.
"Fiduciarydutyisthefoundationthatholdsupthebuilding,"remarksoneMexican
securitiesexpert."Before,thelawwastoobroadandimprecise.Itsaidyoucould
Protecting Investors CASE STUDY: MEXICO
doeverythingtosomeone,butintheendyoucouldn'tdoanything.Itwasabomb
without a fuse." The new law blended broad concepts with specific examples of
whatthelawmakershadinmind.Theresult,impermeabletoloopholes,isenforce-
ablebyjudges.
The new law also extends corporate governance obligations to subsidiaries. And
finally,thelawrequireslistedcompaniestosetupcommitteesofindependentdirec-
tors.Thesecommitteesreviewdealsinvolvingseniorexecutives,limitingexecutives'
abilitytousethecompanyresourcestofundlavishlifestylesorenrichthemselvesat
companyexpense.
Lawyersenthusiasticallygreetedthegreaterdisclosureforcorporateactivitiesand
strongerstandardsfordirectors'obligations."Itkeepstheproperbalancebetween
protection of minority shareholders and protection of the company from overly
burdensome regulatory compliance," says one practitioner. "The main tension in
thelawisnotaproblemofshareholdersinapulverizedmarket.Itismoreamat-
terofputtingaminorityshareholderonthesamelevelasthelargeshareholders,"
addedanother.
Introducing a new corporate form--the SAPI
Thenewlawdidn'tonlytargetlistedcompanies.Facingagapbetweenstrongcor-
porategovernanceprovisionsforlistedcompaniesunderthenewsecuritieslawand
weakerregulationsforprivatecompaniesunderthecompanylaw,drafterssoughta
middlegroundforlargerprivatecompaniesseekingabroaderinvestorbase.They
founditinanewtypeofcorporateform:onewhoseadoptionisoptional,butwhich
offersenhancedcorporategovernance,minorityrightsandbetteraccesstothestock
marketasawaytoattractminorityinvestors.
That new corporate form is the Sociedades An�nimas Promotoras de Inversi�n
(SAPI).SAPIsarestockcorporationsthatofferminorityshareholderstherightto
appoint board members, call for extraordinary shareholders meetings, bring civil
actionsagainstboardmembers,andpostponevotingwithlowerownershipthresh-
oldlevelsthaninothercorporateforms.Inexchangeforvoluntarilyadoptingthese
provisions, SAPIs enjoy exemptions from the general corporations law to allow
shareholdervotingagreements,tag-alonganddrag-alongrights,buy-backmecha-
nismsfortheredemptionofshares,andrestrictionsonpreemptiveandexitrights.
AuthoritieshopeSAPIswillbolsterthelownumbersofnewofferingsontheMexi-
cansecuritiesmarketbycreatingabreedinggroundforlistedcompanies."Compa-
niesthatadopttheSAPIregimewillsignalpotentialinvestorsthatthecompanyisa
goodrecipientofprivateequitywithacrediblelegalcommitmenttohonorthecor-
poraterightsofinvestors,"announcesoneSAPIpromoter.Evenwithoutanultimate
listingonthestockmarket,theregulatorsaimtoincreasemedium-sizecompanies'
accesstoequityfinancingthroughthenewstructurewithoutoverloadingthemwith
complicatedcompliancerequirements.
Protecting Investors CASE STUDY: MEXICO
The initial impact--balance, transparency, openness
Initialsignsindicatethatinvestorsarehappywiththenewsecuritieslaw."Beforethe
newlaw,investorswerediscouragedbythefamilydominationofMexicanfirms,"
saysoneMexicanlawyerwhorepresentsMexicanandforeigninvestors."Previously,
investorsandjointventurepartnershadtobattleforthe51%share.Lawyershadto
beextremelycreativetogetprotectionsfortheirclients.Andwewereneverquite
surethatthejudgeswouldupholdtheprotectionsweworkedintothebylaws."Now
localbusinessesandforeigninvestorsfeelthenewlawhasincreasedbalance,trans-
parency,andopenness.
Thisgreaterconfidenceissupported FIGURE 7
by market indicators. The value of Mexico's stock performance soars
�ndice de Precios y Cotizaciones
sharesandotherequitiesontheMex-
ican stock exchange increased over 25,000
the previous year by 13.1% in the
firstquarterof2006and15.1%inthe 20,000
second--the 2 quarters immediately
followingpassageofthenewlaw.The 15,000
market has continued to perform
well over time: the IPC, Mexico's 10,000
primary stock market index, shows
asteadyincreasebetweenpassageof 2004 2005 2006 2007
thenewlawandMarch2007(figure
7).TheMexicanstockmarketalsorecordedahistoricalhighinforeigndirectinvest-
ment,at$128,813million,withinayearofpassingthelaw--a20.89%increasefrom
thebeginningof2006.AndprivateinvestmentfundsinMexicoincreasedby84%in
2006overtheyearbefore.Themanyinfluencesoninvestmentflowsmakeitdifficult
toattributethesemovementsdirectlytothenewlegislation,butsuchfiguressupport
thegeneralargumentthatMexicohasbecomemoreattractivetoinvestors.
Businessesaretakingadvantageofthelaw'sinnovationsaswell.Morethan40SAPIs
havebeencreated,voluntarilyadoptingstrictercorporategovernancerulestoattract
moreexternalfinancing.TheNationalAssociationofCorporateLawyers,American
ChamberofCommerce,C�maradeComercio,BarraMexicana,MexicanAssocia-
tionofFinancialLaw,Asociaci�nMexicanadeCapitalPrivado,andtheAsociaci�n
MexicanadeInstitucionesBurs�tileshaveallheldworkshopsonthebenefitsofthe
SAPIforcompaniesandinvestorsalike.
Protecting Investors CASE STUDY: MEXICO
Opposition continues
Yetoppositiontothenewlawcontinues.Assoonasitcameintoforce,themedia
groupthatwasinitiallythemostactivecriticofthelawchallenged54ofitsarticles.
Thegroup'sallegations:
� TheCNBV'snewabilitytoissuesanctionspriortoalegalprocedureinfrontof
the court violates the constitutionally protected right to be presumed innocent
untilprovenguilty.
� Thelaw'snewdutiesfordirectorsandauditorsviolatetheirconstitutionalrightto
work.
On18September2006aMexicanadministrativejudgefoundinfavorfor3ofthe
group'scompanies,sothe54articleswillnotapplytothesecompaniesuntilafinal
decision on the provisions' constitutionality. The provisions in question, if found
unconstitutional,couldberevokedfortheentirepopulace.AsofMarch2007,there
hadbeennofinaldecisiononthematter.
Talking with stakeholders--priceless
Despite this threat, lasting lessons arise from Mexico's securities law reform. Pri-
mary among them is the value of involving stakeholders early on in the process.
"Throughthedraftingcommittee,businessgroupswereabletomaketheirpoints
abouttheproposedregulations.Andthenwe,astheregulators,madeourpoints.In
theendwecametocommongroundthatserveduswellduringthepoliticalfight,"
explains one reformer. "But you can't elaborate along the way with them," warns
another."Thatwayyoulosethepen.Youmusthavethevision,presentacomplete
draft,andtakemodifications."
Mexico'spolicymakershavesinceincorporatedtheselessonsintomajorlegislative
efforts."Whatwepassedwastoorevolutionarytoregulatebyimposition,"saysone
drafter."Theopen,inclusiveprocessledtoabetterlaw."Hewasclearonitsvalue:
"AsMasterCardsays,priceless."
Adding a million taxpayers
RitaRamalho
Mosttaxreformshave1goal:increasetaxrevenues.Egyptisnoexception.Witha
budgetdeficitin2004of�E40billion,8.3%ofgrossdomesticproduct(GDP),Egypt
hadtoreform.FinanceMinisterYoussefBoutros-Ghalisaid,"Doingnothingisdefi-
nitelynotthesolution.Thegreatestenemytoreformsisinertia."Egyptdidnotstand
still.Afterreform,taxreturnfilingsincreasednearly50%andincometaxrevenues
grewasashareofGDP,evenwithratecuts.
With8.2millionpeopleintheinformalsector,37%oftheworkforce,therewasa
greatopportunityforbroadeningthetaxbaseandincreasingrevenues.Taxevasion
wasthenorm,withmutualdistrustbetweentaxpayersandtaxauthorities.Taxrates
werehigh.Egyptcharged32�40%oncorporateincome,morethantwicethe15%
inJordanandLebanon.AndEgyptwasthesecondworstintheregionineaseof
payingtaxes.
InJuly2004anewcabinettookofficewithamandatetoreform.Oneofitsgoalswas
toincreaseemploymentthroughinvestment.Todoso,ahighprioritywasplacedon
amendingthetaxlaw,customslaw,andcustomstariffsandonenactingcompetition
andantitrustlaws.MakingEgyptiantaxlawclosertointernationalpracticewould
increaseEgypt'scompetitivenessanditsattractivenessasadestinationforforeign
investment.
The boldest reform would be to simplify tax law so that every business faces the
sametaxburden--withnoexemptions,taxholidays,orspecialtreatmentsforlarge
orforeignbusinesses.Manytaxlawsstartthatway.Butwhenhardtimescomeand
governmentsneedrevenue,theyoftenraisetaxrates.Andlargeorwellconnected
businesses usually get special treatment. Soon the tax law becomes riddled with
exceptions,generallyattheexpenseofsmallbusinesses,whichhavetheleastability
tolobby.Thispushesthemintotheinformalsector.
Eliminating exemptions and reducing tax rates
Fewreformersdareeliminateexemptions,reducetaxrates,andclarifytaxrules.But
Egyptdidjustthis.InJune2005theEgyptianparliamentapprovedLaw91/2005.
Nowallcompaniesareequalunderthelaw,payinga20%taxonprofit(not32%or
40%, depending on the activity, plus 2% as development duty). New tax holidays
and special exemptions were eliminated, as was the state development duty. And
therulesformultinationalcompanieswereimproved.Egyptnowusesadefinition
ofpermanentestablishmentbasedonUNconvention;newrulesfortransferpricing
andthincapitalizationareinplace.
Thewithholdingtaxoninterestandroyaltieswasreducedfrom32%toa20%flat
rate.Thecalculationofassetdepreciationisspecificinthenewlaw,unlikeprevi-
ously,whenthedifferentrulestocomputedepreciationgavemuchdiscretiontothe
taxinspector.
Thepersonalincometaxwaschangedthroughthesamelaw.Thehighestpersonal
taxratewentfrom32%to20%.Allindividualtaxpayersgetanannualtaxexemp-
Paying taxes CASE STUDY: EGYPT
tionof�E4,000.Benefitsinkind,suchasmedicalinsurance,arenowtaxexempt.
Andthetaxbasenowincludesresidentsworkingabroadandnonresidentsworking
inEgypt.
Taxationadministrationalsoimproved.Self-assessmentreplacedadministrativeas-
sessment,essentialforthetaxreform.AsBoutros-Ghalisays,"Thepointofthenew
lawistosaywhatyouwant:whateverclaimyoumake,webelieveyou,noquestions
asked,butyouwillbeheldcriminallyresponsibleandaccountableforyourclaims."
Undertheoldlaw,thetaxpayerwasconsideredguiltyuntilproveninnocent.Now
thetaxadministrationtruststhetaxpayer.
The tax authority does not examine the tax return at the time of submission.
Instead, the authority thoroughly audits a sample of taxpayers within 5 years of
submission.Agraceperiodexemptednon-registeredtaxpayersfromoldtaxesdue
iftheyregisteredandpaidtaxunderthenewlaw.Andcompaniescannowsubmit
computerizedrecords.
Underthenewlawthereislessroomforinterpretation,reducingthepossibilityof
negotiatingtaxes.AsAshrafal-Arabi,theseniortaxadvisertothefinanceminister,
says,"Bargainingisnotinthedealanymore."Replacingtheoldsystemofbonuses
for tax collection for inspectors, the punishment for noncompliance was made
moresevere,andtheaccountantwasmadeliablefortheveracityoftaxinformation.
Underthenewlaw,theaccountantcangotojailfortaxevasion,andfinescangoup
to�E10,000($1,839).Atthesametime,thetaxappealsprocessimprovedtoensure
taxpayers' rights are protected. Taxpayers who overpaid are entitled to a refund
within45daysofthereimbursementapplicationdate.Thegoalofthereformwasto
makethetaxadministrationmoretransparentandfair.
Passing the reform
InJuly2004newreform-mindedcabinettookofficeandoneoftheprioritiesofthe
newministeroffinance,Boutros-Ghali,wastoimprovetheincometaxlaw.Inlate
AugusttheInternationalMonetaryFundreceivedarequesttoassistwithdrafting
thenewlaw.Ittooklessthanamonthtoproducethefirstdraft.InOctober2004
thegovernmentannouncedtheintentiontochangethetaxlawtoreduceratesand
improvetaxcollection.Italsostartedamediacampaigntoinformthepublicabout
thepossiblereform.BytheendofOctoberthelawwasfinalized.
Thelawwaspreparedsoswiftlybecausethefinanceministerwascommittedtothe
project. In November 2004 the cabinet approved the new unified corporate and
incometaxlaw.Theapprovedversionwasdistributedtotheprivatesectorandto
international organizations for review--and sent to the parliament. Roundtables
wereheldwithchambersofcommerce,majoraccountants,andtaxpayersinthe6
monthsbeforethelawwaspassedinJune2005.Thelawforpersonalincometaxwas
effectiveon1July2005andforcorporateincometaxon1January2006.
Paying taxes CASE STUDY: EGYPT
FIGURE 8
Timeline of tax reform in Egypt Source: Doing Business database.
JUL OCT JAN APR JUL OCT JAN APR JUL
JULY 04
New reform-minded cabinet The cabinet sets custom and tax reform as the major priorities
takes o ce
SEPT 04
Draft of income tax law is prepared
OCT 04
Government announces intention Media campaign informs the public about new law
to change tax code
NOV 04
Cabinet approves new law
NOV 04 Little oposition, except from bene ciaries of tax breaks under old system
Government sends law to parliament
NOV 04
Private sector review and public discusion of new law
FEB 05
Executive regulations prepared
JUN 05
Parliament approves new law
JANUARY 1ST 2006 Tax o cials trained on new audit New law takes e ect,
Law e ective for corporate income and record system retroactive for all 2005
Thereformmetlittleopposition.Thepublicingeneralagreedthatitwasneededand
washappywiththeprospectoflowertaxrates.Theoppositioncamefromthecom-
paniesthatlosttheirtaxholidays(5or10yearsofcorporateincometaxexemption).
Themajorchallengewasimplementingreform.Alongwiththereductionintaxrates
therewasamajoreffortforadministrativereformwithinthetaxauthority.Changing
fromadministrativeassessmenttoself-assessmentmeantawholenewwayofcol-
lectingtaxes.Thetaxadministrationwasnotverysupportivebecauseitwasunfamil-
iarwiththenewsystemandthoughtthatithadmorecontrolundertheoldsystem.
Ithadtobeconvincedthatthechangewaspositive,donethroughtraining.
More tax revenues--better economic performance
Over2.5milliontaxpayerssubmittedtheirtaxreturns,asignificantincreasefrom
1.7 million in 2005, in part because of the amnesty for tax evasion. This number
may seem low in a country with 74 million people. But not all taxpayers need to
filereturns.Ifthesolesourceofincomeiswageincome,taxesarewithheldatthe
source.
Taxpayerswithincomeotherthanwagesmustfileataxreturnattheendoftheyear
todeclarethatextraincome.Sothe2.5milliontaxpayersincludeonlycompanies
andthefewwageearnerswithextraincomefromasmallbusiness.Taxrevenuesin-
creased,eventhoughthegovernmentexpectedareduction.Corporatetaxrevenues
wentfrom�E22billioninfiscalyear2004to�E39billioninfiscalyear2005,despite
thefallincorporatetaxrates(from32�40%to20%).Personalincometaxrevenues
Paying taxes CASE STUDY: EGYPT
alsoincreased,ifmarginally,from�E8.1billionto�E8.3billion,againdespitethe
dropinrates.Overallincometaxrevenueincreasedfrom7%ofGDPto9%.
Personalincometaxrevenuesincreasedbothforwageincome(6%)andforsmall
businessincome(4%).Muchoftheincreaseincorporateincometaxrevenuecame
fromtheoilsector,whichexperiencedaboominprices.Thisisstillapositiveresult
forthereform:thetaxratewascutbyhalfandcorporatetaxrevenueshardlyfell.
Sothetaxbasemusthaveexpanded.Morecompaniesarecomplyingwiththetax
system--morethanamillionmore.Thetimetocomplyincreasedfrom504hoursto
536becausecompaniesarestilladaptingtothenewsystem,takinglongerthisyear
toprepare,file,andpaycorporateincometax.
Egypt's economic performance also improved. Growth in income per capita rose
from 2.5% to 4.8%. Domestic investment went from 18% of GDP to 18.7%. The
budgetdeficitwasreducedandforeigndirectinvestmentincreased.
Learning from mistakes
Bothtaxpayersandtaxofficerswilltaketimetoadapttothenewsystem.Thekey
istokeeplearningfrompreviousmistakesandimprovethesystem.Furthermore,
thetaxreformisnotlimitedtochangingtheincometaxlawonly.Anextrastepwas
takeninMay2006whenthesalestaxdepartmentandtheincometaxdepartment
weremergedintotheEgyptiantaxdepartment.With1taxauthoritytodealwith,
companiesdonothavetodoubletheireffortstopaytaxes.Thegovernmenthasalso
proposedchangestothesalestaxlaw.Themomentumofsuccessfulreformcreates
roomforfurtherreform.
The new law changed the tax collection system profoundly. Taxpayers used to be
toldwhattopay.Nowtheycomputethatthemselves.Somefounditdifficulttocom-
pletethetaxforms.Forinstance,theformforcompanieswithanaccountingsystem
is46pageslong.Mistakeswerecommon.Severalsectionsoftheformwereleftblank
justbecausethetaxpayerdidnotknowhowtofillitout.Norweretaxofficersfully
preparedtoexplainhowtheformsshouldbecompleted.
ThesolutionwastoextendthefilingperiodtotheendofJuly,thentotheendof
November2006.Theextensionsallowedpeopletocorrectpreviousmistakeswith-
outhavingtopayafine.Thelesson:havemoredirectcontactwithtaxpayersand
answertheirquestions.
Prepareforimplementation:thetrainingoftaxofficerswasnottimely.Itoccurred
inbatchesandnewtrainingcourseswerestartedevenaslateasOctober2006.On
thepositiveside,taxofficers'lackofknowledgeaboutthelawwasidentified,andthe
taxauthorityistryingtosolvetheproblem.Thenewlawbringsmoresophisticated
concepts,suchasthincapitalizationortransferpricingrules,whicharemoredif-
ficulttoimplement.
Paying taxes CASE STUDY: EGYPT
Thenewresidence-basedsystemismorecomplexthantheprevioussource-based
system,sotrainingisessential.Atrainingcenterfortaxadministrationwillbeop-
erating in mid-2007. With the self-assessment system, tax inspectors become tax
auditors. Rather than assess the tax due, they accept the calculation done by the
taxpayerandauditafewtaxpayersbasedonriskassessments.Buttheyneedtrain-
ingtobecomeadeptauditors.AsofMarch2007ataxauditmanualwasstillunder
developmenttohelptaxauditors.Lessonlearned--preparetaxofficerswell,because
theyareanessentialpartofimplementingthereform.
TheMinistryofFinancefirstdraftedandapprovedthelaw,thendevelopedexecu-
tiveregulationstoimplementit.Theseregulationsareaworkbookthatclarifiesthe
newtaxlaw,anessentialpieceoftaxreformimplementation.Afterthatcamethe
taxformsandtheawarenesscampaignandtraining.TheMinistryofFinancehas
learnedthatthismaynothavebeentherightsequence.Boththetrainingandthe
awarenesscampaignswouldhavebeenmoreeffectiveifstartedearlier.
Still a long way to go
Boththepublicandthegovernmenthaveapositiveviewofthereform.SherifHas-
san,ownerofamedium-sizebusiness,says,"Iusedtopay40%ofprofits,nowIpay
20%andIdomyowntaxassessment.Idon'thavetowaitforthetaxinspectortotell
mewhattopay.Ofcourse,I'mhappywiththisreform."Thegovernmentseesbetter
economicperformance,highertaxrevenues,andhappierbusinesses.
OthercountriescanlearnfromEgypt'sexperience.Thefocuswasonattractingnew
taxpayersintothesystem,accomplishedbyloweringtaxrates,simplifyingtaxcom-
pliance,reducingthediscretionarypoweroftaxinspectors,andseeingthetaxpayer
asactinglegally,butimposingharshpenaltiesotherwise.Othercountrieswithlarge
informalsectorscanusethisreformasatemplateforbroadeningthetaxbaseand
increasingtaxrevenues.
MahmoudMohieldin,theministerofinvestment,says,"Egypthastakenstridesin
the right direction by introducing these reform actions. However, we still have a
longwaytogo,maybeanother15�20yearsbeforeEgyptcanaccomplishthemore
difficulttaskofeliminatingilliteracy,improvinghealthconditions,andintroducing
democraticgovernance."
Speeding up trade
AllenDennis
TradeisnoweasierinPakistan,withcustomsclearanceattheKarachiinternationalcon-
tainerterminaldroppingfrom10daysin2004to4hoursin2007.Customsrevenuesare
alsoup,from115billionrupeesto138billion,despiteareductionintariffs.
Failures of earlier reforms
CustomsreformsarenotnewinPakistan.Indeed,computerizingthecustomsser-
vicesstartedin1979.MorerecentinitiativesincludeanExpressLaneFacility(1998)
tosimplifytheexaminationprocedure,anElectronicAssessmentSystem(2000)to
automateassessment,andaRiskIndicatedSelectiveExamination(2002)toassess
riskintheexaminationprocedure.Othercustoms-relatedreformsincludeoutsourc-
ingcustomsvaluationfunctionstopre-shipmentinspectioncompanies,simplifying
andenhancingtheinstitutionalsetupforthedutydrawbacks,andbringingcustoms
valuationintoconformitywithGeneralAgreementonTariffsandTradeArticle7.
Despitethegoodintentions,customsclearancecontinuedtobecumbersomeand
slow.Clearinganimportcargorequired62�113stepsand26�34customsofficials.
Clearing an export cargo required 31�46 steps and 17�20 handling officials. Not
surprisingly,thislefttradersinPakistanatacompetitivedisadvantage.
Why the inability of the earlier efforts to ease customs clearance?
� Thereformswerepiecemeal.Clearinggoodsoftenrequiredachainofprocesses
(declaration,valuation,examination,payment,andrelease).Sotackling1linkin
thechain,evenifeffective,didlittletoshortenclearancetimeswithoutattending
totheotherlinks.
� Keystakeholderswerereluctanttoparticipate.Tradersexpectedthatsimplifying
thedutydrawbacksystemwouldbelessadvantageoustothem.Customsauthori-
tiesexpectedthatanewvaluationschemewouldmeanlargerevenuelosses.
� Politicalinstabilitymeantthatinthe10yearsto2002,theaveragetenureofthe
chairmanoftheCentralBureauofRevenue,apoliticalappointee,waslessthana
year.
� Theturnoverofkeycustomsstaffwashigh,hamperingcontinuity.
� Customs operations lacked funds. Indeed, a fiscal crisis in 2001 prompted the
reformoftheCentralBureauofRevenue(CBR),theumbrellaorganizationfor
Pakistancustoms.
WhenPresidentPervezMusharrafcametopowerinOctober1999,heappointeda
reform-mindedfinanceminister,ShaukatAziz.Together,theypushedforreforms
inseveralareasoftheeconomy,withrevenueadministrationbeingoneofthemost
challenging. In 2000 the budget deficit was 6.4% of GDP, tax receipts were insuf-
ficienttoservicedebt,andtherewerehardlyanyfundsremainingfordevelopment.
Further,theabilityofthegovernmenttoeffectivelydeliveressentialpublicservices
wasunderthreat,andhyperinflationwaslooming.Reformingthetaxadministra-
tionwasthesinglemostimportanteconomictaskfacingthenewgovernment.Itwas
notanoption--itwasanecessity.
0
Trading Across Borders CASE STUDY: PAKISTAN
A task force to review and recommend
PresidentMusharrafsetupanindependenttaskforceinJune2000toreviewthetax
administrationandrecommendhowbesttoimproveit.HeadedbySyedShahidHu-
sain,aretiredWorldBankexecutive,thetaskforceconsultedwidelywithintheCBR
and among various trade associations. It looked at all aspects of CBR operations,
includingsalestax,incometax,excisetax,andcustoms,andpresenteditsfindings
inMay2001.
In a big departure from the past, the task force viewed customs not merely as a
revenuegenerationagency,butasanintegralpartofeconomicdevelopment.Itsaw
themajorbenefitfromimprovingcustomsservicesinanimprovedtradingenviron-
ment,withreducedtradingtimes,costs,anddocuments.Increasedtradingwould
createjobs,spureconomicgrowth,andenlargetherevenuebase.
Thetaskforcealsoconfirmedtheinadequacyofthepiecemealapproachtoearlier
customsreforms.Andflaggingcorruption,itidentifiedseriousproblemsinbusiness
processesandorganization,humanresources,andinformationmanagement.
A reform unit set up
ThechairmanoftheCBR,RiazMalik,wasgiventhetaskofcomingupwithareform
program. The CBR reform cell had to grapple with several issues. Should the tax
collectionsystembeprivatized,turningtheCBRintoacorporation?Whatshould
bethetimeframeforachievingtheoverallobjectives?Howshouldsalariesbead-
dressed?Shouldexpertsfromtheprivatesectorbehiredforspecificassignments?
ThereformunitreceivedinputoninitialdraftsofthereformagendafromtheWorld
Bank,InternationalMonetaryFund,UNConferenceonTradeandDevelopment,
and a foreign consulting firm (Maxwell Stamp). These consultations enabled it to
assembleacomprehensiveprogramtoreformtheCBR,approvedinMarch2003.
AspartoftheprogramtheCBR'sCustomsAdministrationReform(CARE)setout
to redesign processes in customs operations and modernize customs services--
throughround-the-clockclearance,self-assessments,riskmanagement,apaperless
single-window environment, and reduced opportunities for discreet interaction
betweenimportersandcustomsofficials.
As with the failed Public Revenue Authority Bill in 1998, the 2003 reform faced
hurdles.Staffresistedchange,fearingjoblossesfromtherationalizationofabloated
workforce.Staffalsohadinterestsvestedinacorruptandbadlymanagedcustoms
administration. Government rules and procedures reduced the flexibility that the
CBR needed to hire private sector experts and offer higher salaries to CBR staff
thantootherpublicservants.Alsoneededwasalegalbasisforre-engineeringthe
customs business processes through an electronic data interchange. That's not all.
Possiblepoliticalchangescouldremovegovernmentsupport.Andseveralaspects
ofthereformagendawereexpensive,requiringexternalfunding.
Trading Across Borders CASE STUDY: PAKISTAN
Start with quick wins
The reform cell strategy was to implement the short-term, less costly, quick-win
reforms immediately while preparing the ground for the medium- to long-term
reforms,perhapsmorecomplexandcostly.
Amongthequickwinswassimplifyingthedocumentsrequiredfortrading--asim-
pleadministrativedecisionwithverypowerfulconsequencesfortheeaseoftrading.
Tradersneededtosubmitonly1document,thePakistanGoodsDeclaration.Other
reformsfollowed:
� TheCBRreducedthemaximumtariffratesandthenumberoftariffbands,sim-
plifyingthevaluationofcustomsduties.
� TheCBRpublishedanewprofessionalcodeofethicsandconduct,signallingto
stafftheintenttoeliminatecorruption.
� Tosustainthereforms,theCabinetCommitteeforFinanceandRevenue,headed
by the minister of finance, and the CBR Board, were given fixed 5-year terms.
ThecommitteeoversawtheCBRreformandreporteddirectlytothepresident,
therebybringingconsiderablepoliticalclouttothereform.
� The legal basis for several of the medium- to long-term measures was sought
fromtheMinistryofFinanceandthelegislature.TheseincludedtheCBR'sability
toformulateitsbudgetandadministrativepoliciesinspecificareas,tohaveflex-
ibilityinspendingitsbudget,todecideitscompensationstructure,andtoadopt
itsownhumanresourcerecruitmentanddevelopmentstrategy.Giventhestrong
backingforreform,thenecessaryapprovalsweregranted.
Envisaging resistance to costlier long-term reforms, the CBR adopted a proactive
changemanagementstrategy,seekingtoinvolvestaffinthereformprocessbyde-
fining expectations, building consensus, and articulating a clear vision. Workers
FIGURE 9
Time to import cut in Pakistan 2006
Total time cut
from 39 days
14 to 19
days
2007
2 days
18
days
11
days
Pre-arrival Customs and Port and Inland
documentation technical control terminal transportation
handling
Source: Doing Business database.
Trading Across Borders CASE STUDY: PAKISTAN
fearingjoblosseswereassuredthattheywouldnotbeforcedoutoftheirjobsand
thatallworkersdepartingvoluntarilywouldgeta"goldenhandshake."Thishelped
reduceearlyresistancetoreform.
Costlier long-term reform
Finance. While implementing the quick win measures, a medium to long-term
reformwasalsobeingprepared.TheInternationalMonetaryFund(IMF)approved
aPovertyReductionandGrowthFacilitywithPakistanin2001,includingtaxpolicy
changesandtheCBRreform.TheWorldBankapprovedaprojectdealingwiththe
CBR'smedium-tolongertermreformprograminDecember2004,withmodern-
izingcustomsbeingasignificantcomponent.The$149millionproject,co-financed
bythegovernmentofPakistanandtheU.K.DepartmentforInternationalDevelop-
ment,istobeunderimplementationuntil2009.
Human resources. Amajorlong-termgoalistorationalizetheworkforce.The
CBRisknowntobeoverstaffed,particularlyatlowergrades.Withamovetomod-
ernrevenueadministration,lowerskillswouldbeinevenlessdemand.Animproved
compensation package for the reorganized CBR has been agreed upon. All staff
areexpectedtoapplyforvacanciesandthoserecruitedwillhaveamorelucrative
package.Newstaffareexpectedtohavehigherqualifications,andthestafftraining
programhasbeenimprovedtobuildcapacity.Forstaffnotrecruitedthestrategyto
reducetheworkforceisvoluntaryandspacedover5years(2005�09).CBRofficers
with25yearsofserviceareexpectedtoretire.Andanysurplusstaff,particularlyat
lowergrades,wouldbeofferedcareercounselingandretraining.
Modernizing customs services. Customs procedures are being modernized
through the Pakistan Customs Computerized System (PACCS). Unlike previous
standalonemodules,thePACCSisacomprehensiveintegratedinformationtechnol-
ogysystemtoimplementusermanagement,carrierdeclaration,goodsdeclaration,
risk management, assessment, examination, payments, management information
systems, transhipment management, status notification, clearance management,
adjudicationmanagement,securitymanagement,bondedwarehousemanagement,
andataxnode.Thenewsystemstreamlinestheclearanceprocess(allowingforpre-
arrivallodgingofdeclarations,electronicpayment,andsignatures)andappliesrisk
management.
PACCS was piloted in April 2005, and the electronic submission of documents
wasfullyimplementedattheKarachiInternationalContainerTerminalbyJanuary
2006.Traderscannowlodgedocumentsbeforegoodsarriveattheport,avoiding
customsdisputesbecausethesystemautomaticallydeterminestheduty.Thanksto
riskprofiling(green,yellow,andredlanes),customsofficialsdomuchlessphysical
inspectionofgoods.
ThesuccesschalkedupsofarismainlyatKarachiInternationalContainerTerminal,
itiscurrentlybeingrolledoutto11othercustomscollectorates.
Trading Across Borders CASE STUDY: PAKISTAN
FIGURE 10
Timeline of trade law reform in Pakistan Source: Doing Business database.
2001 2002 2003 2004 2005 2006
Setting up of reform task force
Task force presents findings
Design of reform by reform cell
Legislative and administrative measures
Study of other customs administrations
Customs Software evaluation, analysis and design phase
World Bank approves funding for project
Implementation of pilot integrated computerized customs clearance system
Implementation of full-scale computerized customs clearance system in Karachi
Roll-out of new system to 11 other Customs collectorates
Work force rationalization
Repairing a car with the engine running
SabineHertveldt
Commercial cases in the Nigerian state of Lagos can now be resolved in about a
year--instarkcontrasttothesituationduring16yearsofmilitaryrule.In1997the
average duration of commercial cases before the court was over 4 years, and new
casesfiledinthelate1990sdidnotstandareasonablechanceofbeingconcluded
withinadecade.Peoplehadnofaithingettingjusticethroughthecourts.
LagosstartedreformingthecourtsafterNigeriareturnedtodemocraticgovernment
in1999.Thegovernor-electofLagos,SenatorBolaAhmedTinubu,promisedtoput
thingsright.Immediatelyafterhiselectioninlate1999,hecreatedajusticepolicy
committeetoreviewtheentirelegalsystem.Theheadofthiscommittee,Professor
Yemi Osinbajo, commissioned a widely publicized study that showed the judicial
systemtobesufferingfromrampantcorruptionandseverebacklogs:99%oflaw-
yers polled agreed that the Lagos judiciary was corrupt. And pending before the
HighCourtinMay2000were40,000cases,with10,000newcasesfiledeveryyear.
AssoonashewasappointedattorneygeneralofLagosinJune1999,Osinbajostarted
reformingtheentirejudiciary,relyingonstrongsupportfromTinubu.Judicialre-
forminLagoscontinuestoday.Whilesomereformswereimplementedimmediately
afterthenewgovernmentwaselected,othersareongoing7yearslater.
Corrupt judges dismissed
The1999NigerianConstitutioncreatedtheNationalJudicialCouncil,anindepen-
dentbodythatcanrecommendtheappointmentandthedismissalofjudgestothe
presidentandstategovernors.
Before2000nojudgehadeverbeendisciplinedforcorruptioninNigeria.Tosani-
tizetheNigerianjudiciary,theNationalJudicialCouncilinstitutedareviewpanelin
2001.Overthenext6yearsitreviewed130judges,recommending8fordismissal,
15forcompulsoryretirement,and13forreprimands.Asof2002,21magistratesand
3highcourtjudgeswereeitherdismissedorretired--themostthoroughoverhaulof
thejudiciaryinNigeria'shistory.
On22May2001theLagosJudicialServiceCommissionappointed26judgesfrom
diversebackgroundstotheHighCourt,bringingthenumberofjudgesto50and
reducingtheaverageagefrom55to44.Theappointeeswentthroughacomprehen-
sive6weektrainingprogram,includinglegal,Internet,andcomputertraining.In
2003another6judgeswereadded.
Appointingjudgesfromvariousbackgrounds--fromuniversities,finance,andcom-
merce--turnedouttobeagoodstrategy.Sixyearslater,someofthemosthighly
regardedjudgesarethosewithexperienceinareasotherthancourtroomlitigation.
Toattracttherightcalibertothebenchandreducethedependenceonbribemoney,
judges'monthlysalariesquadrupledfrom$600to$2,400between1999and2001.
On top of the salary, each judge receives medical insurance, a free vehicle, and a
family house. A study showed that the greatest concern for judges is post-retire-
Enforcing Contracts CASE STUDY: NIGERIA
FIGURE 11
Timeline of judicial reform in Lagos Source: Doing Business database.
1999 � 2000 � 2001 � 2002 � 2003 � 2004 � 2005 �
Tinubu elected governor; Osinbajo
appointed attorney-general � Judge salaries increased 4-fold
Perception of corruption survey
� Start of review panel for Nigerian judiciary
22 new High Court rooms
+ 18 refurbished court rooms � Citizens Mediation Centers established in Lagos
First Summit of Stakeholders decides review
of High Court Rules is needed � 26 new judges appointed in specialized divisions
Specialized divisions created within Lagos High Court
� Second Summit of Stakeholders reviews draft High Court Rules
Rules Committee meets regularly to discuss new High Court Rules
High Court Rules nalized � Lagos parliament adopts
High Court rules
Court Automated Information System established
Citizens Mediation Centers in 12 Nigerian states
National Judicial Council travels to Nigerian states to present judges' performance
ment housing. The compensation package now allows judges to lead comfortable
lives.Andsince2000,theNationalJudicialCouncilhasgiveneachjudgeanallow-
anceof$1,568forcourtroomexpenses,withauditorsroutinelyinspectingexpense
receipts.
Alsoin2000and2001,22newcourtroomsfortheHighCourtwereconstructed,
and18wererehabilitatedandsuppliedwithcomputers,generators,andaircondi-
tionersatacostofmorethan$9.6million.Achallengethenandtodayiselectricity,
withthecostoffuelforgeneratorsrunningthousandsofdollarsamonth.
In2001,whenthe26newjudgeswereappointed,specializeddivisionswereintro-
ducedintheHighCourtforcommercialcases,land,family,revenue,criminal,and
generalcivilmatters.Eachjudgewasappointedtoaspecializeddivision,depending
onbackgroundandprofessionalexperience.Forexample,JusticeAtinukeIpaye,a
formerfamilylawprofessor,wasappointedtothefamilydivision.JusticeHabeeb
Abiru,alawyerwithextensiveexperienceinpropertylaw,wasappointedtotheland
division.
Enforcing Contracts CASE STUDY: NIGERIA
New rules for the High Court
On16October2000,theSummitofStakeholdersontheAdministrationofJusticein
the21stCenturyconcludedthatreducingdelaysanddecongestingthecourtswould
beimpossiblewithoutreviewingthecourtrules.ThereviewstartedinApril2002.
The10membersoftheRulesCommitteewerechosenfromprivateattorneys,serv-
ing and retired justices, the Lagos Ministry of Justice, and representatives of the
LagosbranchoftheNigerianbarassociation.Hurilaws,anongovernmentalorga-
nizationofhumanrightslawyers,preparedafirstsetofdraftrules,inspiredlargely
bytheU.K.courtrulesaftertheWoolfreform.TheNigerianInstituteofAdvanced
LegalStudiesthendraftedasecondsetofrules.FromApril2002toearly2003the
RulesCommitteemetweeklyandsometimesdailytoreviewexistingrulesandto
takethebestideasfromthe2setstoproduceafinalversion.
Onimportantissues,suchasintroducingpretrialconferences,acommitteemember
wasaskedtoprepareaseparatememotobediscussedatthefollowingcommittee
meeting.Heateddebatestookplaceoncontentiousissues,suchasputtingacapon
thenumberofextensionsandadjournments,whichsomecommitteememberssaid
wouldviolatefundamentalrights.
Inearly2003theRulesCommitteepresenteditsdraftrulesatthesecondSummit
ofStakeholders.Allkeyofficersofthejusticesystemwerepresent,whichwaspar-
ticularlyusefulinwinningoveragroupofopposinglawyers.TheRulesCommittee
amendedsomeofitsrulesandfinalizedthembytheendof2003.InMarch2004
theLagosStateLegislatureadoptedthemwithoutchangesandinJune2004thenew
rulesenteredintoforce.
The new High Court rules include three innovations to reduce court delays and frivolous cases:
Frontloading evidence.Itisnowmandatoryforpartiestosubmitallevidence
they intend to rely on at the start of the legal proceedings. If the plaintiff fails to
submittheevidenceupfront,hisclaimwillnotbeacceptedforfilingatthecourt's
registry. Because parties must submit witness depositions and copies of all docu-
mentstheyplantouseduringtrial,theyarediscouragedfromfilingfrivolousclaims
meantonlytoexertpressureontheotherparty.
Deadlines for actions. The2004rulesspecifytimeframestotakecertainac-
tions.Forexample,defendantsareexpectedtofileastatementofdefensewithin42
daysofreceivingthestatementofclaims.Theoldruleshadnotimeframes.
Pretrial conferences. A promising aspect of the reform was the mandatory
pretrialconference,aninformalmeetingofthejudgeandthepartiestoexplorethe
possibilityofsettlingthecaseamicably.Theconferencesalsolimittheareasofdispute
andsettlepreliminaryapplications,suchaschallengestothecourt'sjurisdiction.
The2004LagosHighCourtruleshaveservedasamodelforotherNigerianstates.
Enforcing Contracts CASE STUDY: NIGERIA
Automating court information
TheCourtAutomationInformationSystemstartedinJanuary2005.JusticeAbisoye
Ayo, a judge in the commercial division, has managed it since inception. Having
workedintheUnitedStatesforanITcompany,shecloselymonitorsweeklyprogress
madebyall300judicialassistantsandcourtrecorders,courtregistrars,secretaries,
andcomputeroperatorsinputingcourtcasesandcaseeventsintothesystemover
theintranet.Theobjectivewasforalllitigationcasestobeuploadedtothesystem
byApril2007.Inthenearfuture,lawyerswillbeabletoregistercasesandfollow
themonline.
Thesystemseekstoreducecasebacklogandcourtdelays,assigncasesrandomly,
andcalculatecourtfeesautomatically.Moreimportant,itwillmeasure,manage,and
improve individual and overall judicial performance. Case disposition standards,
basedontypeofcase,arereportedforeachjudge.Thesystemwillalsomonitorthe
performanceofjudgesagainsttargets.
Citizens mediation centers
AspartoftheAccesstoJusticeProgram,5citizensmediationcenters,modeledon
U.S.communitymediationcenters,openedinLagosin2000.Inthesecenters,38
trainedmediatorsworktosettlesmalldisputesthatwouldotherwiseendupinthe
courts.Themediatorsarelegalcounsels,employedandpaidbytheLagosMinistry
ofJustice.
The5centersinLagosresolvedisputesquickly,freeofcostfortheusers,andthey
respond to people's need to have their day in court--without getting stuck with
formalisticandlengthycourtproceedings.TheLagoscentershavesofarreviewed
morethan17,000cases,resolving15,950ofthemamicably.Partieswereadvisedto
seekredressincourtinonly332cases.
Fewer cases go to court and fewer cases stay in court
Fewer court cases are filed. Up to 25-30% of all commercial cases are re-
solvedduringthefirst5 monthsof theproceedings,andaveragecourtdelays are
muchreduced.Furtherimprovementsinefficiencyareexpected.
Fewer cases go to court. ThecitizensmediationcentersinLagoshavehandled
17,000casessofar,manyofwhichwouldnormallyhaveendedupincourt.Alarge
number of cases are now filed at the mediation centers because they are resolved
faster,atalowercost.In2005,inspiredbytheenormoussuccessofthecentersin
Lagos,all35stateattorneysgeneraldecidedtoestablishsimilarcenters.Twelveare
alreadyinoperation.
Fewer cases stay in court. Duringpretrialconferences,judgesmeetwiththe
parties informally and explain to each the strengths and weaknesses of the case.
Theytellthepartieswhattheoutcomeofthecaseislikelytobeifthecasewereto
Enforcing Contracts CASE STUDY: NIGERIA
gototrial.Attheendofthemeeting,thepartiesdecideeithertosettlethecaseor
gototrial.Thejudgedraftsapretrialconferencereport,describingthehistoryofthe
case,theissuesthepartiesaredisputing,andtheoutcomeofthepretrialconference.
Ifthepartiesdecidethecaseshouldstillgototrial,thecaseisallocatedtoanother
judge, to avoid conflicts of interest between the judge acting as mediator and the
judgeactingasadjudicator.
Becauseofthemandatorypretrialconferences,upto30%ofallcommercialcases
arenowdisposedwithinthefirst5monthsoffiling.Beforethenewruleswerein
place, all cases, once filed, stayed in court until a final decision was reached. To
insurethecontinuedsuccessofpretrialconferencesjudgesmustbetrainedintheir
newroleasmediators.
Average court delays reduced. For commercial cases the average time to
reach a decision after filing a case dropped by 38%, from 730 days to 457. That
movedNigeriafrom105thto66thpositionintheDoingBusinessrankingsforcon-
tractenforcement.Incaseswheredefendantsdonotpersuadethejudgethatthey
haveareasonabledefense,summaryjudgmentscanbegiveninabout8months.
Reform is like repairing a car with the engine running
Nearly85%ofreformstakeplaceinthefirst15monthsofanewgovernment.Re-
centlyelectedgovernmentstrytopushreformsthroughatthestartoftheirterm,
asLagosdid.
It did not take years of careful strategizing to build new courtrooms and repair
existingones.LessthanayearafterOsinbajowasappointedasattorneygeneralof
Lagos, 26 judges were appointed, specialized divisions set up, and judges' salaries
increased.
Manyjudicialreformsfailbecausetheyaddresssymptoms,nottheproblem'sroots.
Tobeeffective,judicialreformmustaddressallrelevantissuesatonce,including:
attractingandretainingtherightpeopleatthebench,disciplininglawyerswhoen-
gageindelaytactics,establishingmoderncourtrules,limitingthenumberofcases
thatgotocourt,limitingthenumberofinactivecasesthatstayincourtforyears,
automatingcourtproceduresandmeasuringjudicialperformance.
Lagosdidnotonlymodernizeditscourtrules,dismissedcorruptjudges,andintro-
ducedalternativedisputeresolution.Itstartedafightonallfronts,withoutallowing
thechallengestoaffectitsdeterminationtoprovideafairandefficientjusticesys-
tem,withaccesstojusticeforall.
What gets measured, gets done. Measuring performance enhances perfor-
mance.Thisappliestoall,includingjudges.Iflazyjudgesarenotdisciplinedand
hardworkingjudgesarenotcompensatedorpromoted,performanceflags.
Enforcing Contracts CASE STUDY: NIGERIA
TheNationalJudicialCouncilmonitorsjudicialperformanceatthefederallevel.In
May2006officersfromtheCounciltraveledtothe36Nigerianstatestoannounce
its ratings of individual judges. Those who scored poorly were invited to provide
an explanation. Although the performance evaluation system is still developing
andoftencriticized,judgesnowknowtheyarebeingmonitoredbyaninstitution
withdisciplinarypower.Thisinitselfhasbeenuseful:thepoorestperformershave
alreadyleftthebench.
Measuringperformanceisusefulatalllevels,includingthelowest:allsupportstaff
intheLagosHighCourtmustnowsubmitweeklyprogressreportsonthenumberof
casestheyenterinthecourtautomationsystem.AfterJusticeAbisoyeAyocollects
theprogressreports,shedistributesthemtoalljudgesforthemtoseewhichstaff
membersareperformingwellandwhichappeartobebusyonlywhenthejudgeis
around.Healthycompetitioncandowonders.
Adjust foreign models to local needs. Reformers often look abroad for
inspiration.ThecitizensmediationcenterswerecopiedfromtheU.S.model,suc-
cessfulinlargecitieslikeNewYork.Theydowellbecausetheyarefreeandtheir
proceduresaresimple.
But highly complex features from courts in developed countries cannot be easily
transferred to developing countries. The committee in charge of the new Lagos
High Court rules rejected the U.K. multiple case-track system because it was too
advancedforLagos.
Implementing reforms--avoiding one step forward, two steps back.
Judicialreformneedsconstantfine-tuning.InLagosthenextchallengesareestab-
lishingseparatecommercialcourtswithtailor-maderulesforcommercialcasesand
reducingthelongdelaysbeforetheappealscourts.ProgressintheHighCourtrisks
beinglostifreformsarenotextendedtotheappealscourt.
Initialpositiveresultscandisappearquickly,anddisillusionoverfailedreformscan
leadtoquestioningwhetherfurtherreformsareworththeinvestment.Toavoidthe
riskofgoing1stepforward,2stepsback,reformsmustbeimplementedatalllevels
andtheireffectsmeasuredconsistently.
ThatiswhyLagosisnowturningtoitsappealscourts.Ofallcasespendingbefore
theappealscourts,80%areagainstinterlocutoryordersfromtheHighCourt.Such
ordersdealwithproceduralissues,suchaswhetherornotthecourthasjurisdiction
to decide the case or whether the time limits to file have passed. Although High
Courtjudgesmaycontinuetodealwithcaseswhileaninterlocutoryorderisbeing
appealed,somecasesaresuspendedwhilewaitingfortheappealscourt'sdecision.
This is an important reason why the disposal time before the High Court is not
fasterandcaseskeepaccumulating.Expandingthereformsandchangingtheap-
pealscourtrulescanensureprogresscontinues.
0
Faster, more orderly exit
JustinYap
Winding up a failed Serbian enterprise could take 10 years or more.The entire
bankruptcy process was susceptible to corruption by bankruptcy administrators
andjudges--includinganinfamousgroupknownasthe"bankruptcymafia."After
aggressivereforms,theaveragedurationisnowlessthan3years,andtheprocedure
itselfenjoysgreatertransparencyandprofessionalism.
The new government that took power in January 2001, led by reformist Prime
MinisterZoranini,facedadauntingtask.SincethebreakupofYugoslaviain
1991-92, Serbia had become embroiled in one regional military conflict after an-
other.Theseconflictsravagedaneconomyalreadyweakenedbygeneralgovernment
mismanagement. By 2000 Serbia's gross domestic product (GDP) was half that of
1989,publicdebtwas130%ofGDP,andinflationhit113%.Between1994and2000
theYugoslavdinarlost97%ofitsvalue.
The ini government made the privatization of state-owned enterprises a cor-
nerstoneofitsliberalizationprogram.InJanuary2001MinisterofEconomyAlek-
sandarVlahoviannouncedthat"4yearsfromnowsociallyownedcapitalwillbe
completelyeliminated";inJune,Parliamentpassedaprivatizationlaw.Butitsoon
becameclearthatmorethan50yearsofstateplanningandneglecthadleftalegacy
thatnoprivatizationlawalonecouldfix.
A World Bank report observed that a "functioning bankruptcy law is required in
Serbiatoprovideanefficientalternativetothemethodsofprivatizationofsocialand
statecapitalsetoutinthePrivatizationLaw."TheMinistryofEconomyestimated
that 3,000 enterprises were irretrievably inefficient and impossible to privatize
throughregularauctionsandtenders.Theywouldfirsthavetoberestructuredand
thenprivatizedinbankruptcyproceedings.BankruptcyreforminSerbiawasthus
closelylinkedtoprivatization.
The law then in effect--on forced settlement, bankruptcy, and liquidation--was
not adequate. Courts applied it unevenly, opting in many cases for an unofficial
and ad hoc "working bankruptcy" that prolonged the existence of uneconomical
enterprisestopreventjoblosses.Thelawalsofailedtoproperlydefinetherolesand
responsibilities of bankruptcy administrators and creditors, and it contained no
provisionforreorganizingviablecompanies.
Drafting and passing the new law
Vlahovi,whosevisionandsupportofthereformprocesswerecrucialinlaunch-
ingthebankruptcyreform,decidedtopushforwardwithplanstoprivatizeSerbia's
stateandsociallyownedenterprisesandintroduce,intandem,anewbankruptcy
lawattherepubliclevel.HeorderedanewlawdraftedinDecember2001,delegating
thetasktoaninitialworkinggroupthatincludedseveralcommercialcourtjudges,
lawyersandlawprofessors.
Progressonthenewlawwasrelativelyslowuntil2003,whendonorpressureandthe
needtofitthelawintotheSerbianparliament'sscheduleledVlahoviandDeputy
Bankruptcy CASE STUDY: SERBIA
Minister Mirko Cvetkovi to demand an accelerated timeframe. At his request,
a group of 4 Serbian and several foreign experts from the World Bank and U.S.
AgencyforInternationalDevelopment(USAID)producedafirstdraftwithinthe
timedemanded.
ThecoregroupsubmittedthedraftforpublicconsultationwithvariousSerbianlegal
authorities,includingjudgesofthecommercialcourts,thehighcommercialcourts,
and the Supreme Court of Serbia, as well as chambers of commerce, attorneys,
andlawprofessors.Inaddition,thechambersofcommerceorganizedforumsand
roundtablestopromoteanddiscussthedraftlaw.
TheMinistryofEconomydistributedthedrafttotheMinistriesofFinance,Justice,
andLabor(aswellasthemajortradeunions)forreviewandcomment.Afterthe
MinistryofEconomyreviewedthecommentsandfinalizedthedrafttext,thegov-
ernmentofSerbiaapprovedthedrafton5June2003.Thedraftwasthenhandedover
toalegislativepaneltopolishthetextandprepareitforreadingbyParliament.
Threemonthsearlier,however,theassassinationofPrimeMinisteriniplunged
Serbiaintoapoliticalcrisisthatstalledthelaw'spassage.Afurthersetback:theDe-
cember2003electionsbroughttopoweragovernmentthathadnointerestinthe
proposedlawandthatwithdrewthebillfromParliament.OnlyinMarch2004did
thegovernmentpickupthedraftagain.InJuly2004,Parliamentapprovedaversion
ofthedraftrevisedslightlytoincludetheUNCITRALModelProvisionsonCross-
Border Insolvency. The Law on Bankruptcy Proceedings entered into force on 2
August2004andtookeffecton2February2005.
Training administrators and judges
Trainingtheadministratorsandjudgeswasimportantinimplementingthenewlaw,
whichcouldworkonlyifthepartieswithadirecthandinbankruptcyproceedings
werefamiliarwiththelaw.SerbiaenlistedUSAIDandGermany'sGesellschaftf�r
TechnischeZusammenarbeit(GTZ)toputtogethertrainingprograms.
Administrators--valuations in 22 minutes! USAID organized 6 seminars
totrainadministrators."Theseminarsfocusedonpracticaltraining,"explainsMilo
Stevanovi,theUSAIDconsultantwhoassistedthecommitteeindraftingthelaw.
Forexample,theseminarstriedtoeducateadministratorsonhowtoworkwithinthe
newlaw'sstricttimelimits."Administratorsthoughtitwasimpossibletoperforma
valuationin30days--theythoughtthat1personwouldhavetocounteverynutand
boltinthefactory,"Stevanovicontinues."Webroughtin1professionaltrusteeand
askedhimtogiveavaluationofthehotelwheretheconferencewastakingplace.
Hecameupwithavaluationin22minutes--everyonewasstartled."Otherseminars
emphasizedotherpracticalissues,fromdemonstratinghowmanycreditors'claims
anadministratorcanevaluatein1hour,tohowtoconductassetsales.
Bankruptcy CASE STUDY: SERBIA
Judges--observing proceedings firsthand in Los Angeles.Soonafterthe
releaseofthefirstdraft,SerbianmembersoftheoriginaldraftinggroupjoinedU.S.
andGermanexpertsintouringthecountry'scommercialcourtstoseetheproposed
changes.
USAIDalsosponsored2conferencesforSerbianjudgestodiscussissuesthatarose
in their practice, the first in Vrsac, a town in the Vojvodina region near the Ro-
manian border, and the second at Lepenski Vir, a significant archeological site in
easternSerbia.ThenewlawmetconsiderableresistanceandskepticismattheVrsac
conference, but the judges warmed to the law somewhat at Lepenski Vir, as they
graduallybecamefamiliarwiththereforms.
Some commercial court judges also had the opportunity to observe firsthand the
workingsofbankruptcycourtsoverseas.USAIDconsultantStevanoviled3groups
of 8 commercial court judges on 1- or 2-week study tours to Los Angeles, to ob-
servetheU.S.BankruptcyCourtfortheCentralDistrictofCaliforniainaction.The
judgessawhowU.S.judgesreliedonattorneystodraftorders,usedautomation,and
rantheirbackoffices.
AccordingtoStevanovi,itwasan"eyeopener"forthejudgestoseetheoperational
nuances of a court that works quickly, effectively, and efficiently: "One judge said
shehadthoughtthereformsweremovingmuchtooquickly,butonceshesawhow
thingsworkedinLosAngeles,shesaidsherealizedthat`wewereincrediblybehind
andhadtomovemuchfaster.'Anotherjudgereportedthat,ifhehadhadtheclarity
ofwhathesawinLosAngeles,hewouldneverhaveopposedthechangesinthelaw
inthefirstplace."InStevanovi'sopinion,thestudytoursbenefitedtheimplement-
ersofthereformasmuchastheybenefitedthejudges:"Foreverydimewespenton
[thetours],wesavedtimeandeffortonovercomingresistancefromthejudges.They
werewelcoming[thenewlaw]insteadoffightingit."Stevanovisaidthatthestudy
toursalsobolsteredUSAID'scredibilityasreformers,asjudgescould"feelandtaste
andsmell"forthemselvesthatwhattheywerebeingtoldwasnotjustdrytheory,but
couldbeappliedintheirpractice.
TrainingforjudgesdidnotendafterParliamentpassedthelaw.BeginninginJune
2004GTZorganizedsix2-dayseminarsforCommercialCourtjudges,ledbyJudge
RudolfVoss,anexperiencedinsolvencypractitionerfromMunich.
In2006GTZorganized4roundtablesattendedby15�20commercialcourtjudges
and representatives of the Privatization Agency and the Bankruptcy Supervision
Agency.Theroundtablesallowedparticipantstodiscussissuesinimplementingthe
newlaw,especiallyproceduresinvolvingsociallyownedenterprises.Basedonthe
judges' own evaluations,thesessionswerea"comprehensivesuccess."MilosBalti,
coordinatorforGTZ,observes,"Althoughbothsideswerereluctanttoopenthedia-
logueatfirst,afterthefirsthalfhour,itwasdifficulttogetthemtostoptalking."
Bankruptcy CASE STUDY: SERBIA
Eliminating delays
Lawyers,administrators,judgesontheHighCommercialCourt,andofficialsinthe
BankruptcySupervisionAgency,whilevoicingsomereservations,declaredthem-
selves satisfied with the reform. One attorney noted that bankruptcy procedures
nowmovemuchfasterandthatthereisnoroomfordelaysanduncertainties.Other
improvementsincludetheenhancementoftheroleofcreditorsandthemorestrin-
gentqualificationsrequiredofbankruptcyadministrators.AccordingtoJayAllen,
insolvency counsel at the European Bank for Reconstruction and Development
(ERBD),thereform"leadsthewayintheregion."Meanwhile,theWorldBankcom-
mendedthelawasbeing"designedtominimizetheimpactofexistinginstitutional
deficienciesinthejudiciaryandthetrusteecommunity."
TheBankruptcySupervisionAgencyisoneoftherealinnovationsofSerbia'sbank-
ruptcy law, especially in the Balkans and continental Europe. An agency within
theMinistryofEconomy,itwascreatedtoregulatethebankruptcyadministrator
profession.RobertGourley,oneofthearchitectsofthereform,saysthathisexperi-
ence with the Canadian licensing system led him to promote a similar system in
Serbia.Thecodeofethicsandprofessionalstandardsforbankruptcyadministrators
wasanothermajorstep.Sofar412individualshavepassedthelicensingexamfor
bankruptcyadministrators,339arelicensedbytheagency,and237areinvolvedin
bankruptcycases.
The law measurably improved all the major areas it was intended to address
Strict deadlines. The reforms set clear timeframes for completing particular
partsofthebankruptcyprocedure.Theaveragetimeforacompanytogothrough
bankruptcyhasfallenfrom7.3yearstoonly2.7.Thisshorterdurationhasalsore-
ducedthecostofbankruptcyandenhancedrecoveryforcreditors.Allwage,rent,
andutilityexpensesincurredbythedistressedcompanyafterthestartofproceed-
ingsareconsideredbankruptcycostsandhavepriorityovertheclaimsofunsecured
creditors.
Clearly defined roles of bankruptcy administrators. Thenewlawre-
quires the bankruptcy administrator to consult with creditors on most important
decisions. For example, the bankruptcy administrator must now obtain creditors'
writtenconsentbeforesellinganyassets,takingaloan,orgrantingalien.
Reduced corruption. Onlytimewilltellwhetherthenewlaweliminatescor-
ruption.Butthelawputsinplaceseveralmechanismsthatdiscouragecollusion:the
licensingofbankruptcyadministrators;theseparationofpowersamongjudges,ad-
ministrators,andcreditors;andcreditors'greaterabilitytoinfluenceanddetermine
outcomes.Thenewlawalsorequirescreditors'writtenconsentforassetstobesold
throughdirectnegotiationswithaprivatebuyer.
Bankruptcy CASE STUDY: SERBIA
Priority rankings to creditors' benefit. Secured creditors now enjoy a
"super-secured" position that stands above and apart from the priority rankings
grantedtoothercategoriesofcreditorsandclaims:(1)bankruptcycosts,including
post-bankruptcywages,rentandutilities;(2)pre-bankruptcywagesupto1year,and
unpaidsocialsecurityandhealthcontributionsforupto2years,beforetheopening
ofthebankruptcyproceedings;(3)taxclaimsupto3monthsbeforetheopeningof
thecase;(4)allothercreditors.Thetimerequirementsreducetheclaimsrelatedto
bankruptcycostsandpre-bankruptcywages,benefitingunsecuredcreditors.
Higher qualifications for bankruptcy administrators.Althoughmany
oftheadministratorswhopassedlicensingexamswerealsoadministratorsunder
the old system, Jovan Jovanovi, director of the Bankruptcy Supervision Agency,
reportsthatthelicensingrequirementshavehadapositiveeffectonadministrators'
senseofprofessionalism.Thepassratewasonlyabout20�25%forthefirstexams,
but50%forthelastexam.Jovanovisaidthatthisincreasewasduetoadministra-
tors"takingtheirjobsmoreseriously."
Buy-in is crucial
Obtainingthebuy-inofthevariousstakeholderswascrucialtothereform'ssuccess,
butalsoanareawithlessonsforfuturereformsinSerbiaandelsewhere.Meetings
withunionrepresentativestovetthelawallowedtheunionstofeelthattheycould
havetheirsay.Andintheendtheunionscameoutforthelawbecausetheyreceived
a(capped)wagepriorityclaimthatnonethelessrankednearthetop.
Notallstakeholdersgavetheirunequivocalbuy-in.Despitetheapparentsuccessof
thetrainingforjudges,perceptionsofjudges'acceptanceofthenewlawaremixed.
Gourley, one of the key people behind the reform, explained that, by altering the
balanceofpowerbetweenjudgesandcreditors,thenewlaw"underminednotonly
[judges']independencebutalsotheirfreedomofaction."That,ofcourse,waspre-
ciselythepoint.Asaresult,thelawwasneverwidelyacceptedamongalljudges,and
todayasegmentofthejudiciaryconsistseitherofpassivecooperatorsorjudgeswho
areactivelytryingtounderminethelaw.
OneuniqueoutcomeofSerbia'sbankruptcyreformistheemergenceofanadhoc
committeethatgroupsrepresentativesfromthePrivatizationAgency,USAID,and
GTZ, as well as 2 supreme court judges, 2 high commercial court judges, and 6
commercial court judges. At its biweekly meetings, 20�25 people discuss issues
in the day-to-day practice and implementation of the bankruptcy law. The issues
raised--typically5or6permeeting--aretrackedandrecordedonagrid.Themeet-
ingshelppreventmisunderstandingandmakeiteasiertogetstakeholders'buy-in,
sinceinterestedpartiescanvoicetheirconcernsandrespondtoreal-lifeissuesthat
cropupinimplementingthelaw.
Bankruptcy CASE STUDY: SERBIA
New bankruptcy supervisory agency--a great success, but...
The Bankruptcy Supervisory Agency is generally recognized as one of the great
successesofthereform.Butthereisdisagreementoverwhetherithasassumedthe
fullmantleofdutiesitwasintendedtotakeon.Ithasbeenverysuccessfulintrain-
ing administrators, instituting professional standards, conducting examinations,
andissuinglicenses.Butithasnotyetassumeditsintendedsupervisoryand--es-
pecially--disciplinaryfunctions,stymiedbyanonbindingsupremecourtopinion
limitingitsregulatoryfunctions.
Oneobserver,toremainanonymous,says,"Theagencywastold,`You'retheregula-
tor'andtheresponsewas`What'saregulator?Youcan'texpectsomeonetomakefire
iftheyhaven'tseenfirebefore.'"Thatmakesiteasyfortheagencytostrayoutofareas
itwassupposedtoregulateintoareaswhereitwasnot.
Overall, however, Serbia's experience of bankruptcy reform appears to be an ex-
ample of a generally successful reform that continues to inspire efforts to further
improvethecountry'sbankruptcylaw.
Acknowledgements
ThecasestudiesweresponsoredbytheDoing BusinessprojectandUnitedStatesAgencyforInternational
Development.
AmyAllen,TomJersild(independentconsultant),JimMcNicholas(independentconsultant),KirilMinoski,
JamesNewton,FarahSheriff,ZoranSkopljakparticipatedinpreparationofthecasestudiesbyBoozAllen
HamiltonInc.onbehalfofUSAID.
Doug Balko, Caroline Brearley, Jelena Bulatovic, Wade Channel, Irina Gordeladze, David Gosney, Peter
Lampesis,MargaretaLipkovska,MarioMartinez,StevenNdele,CoryO'Hara,MarkPickett,MajaPiscevic,
AmyCoganWares,LisaWhitleyofUSAIDprovidedcommentsandreview.
ThecasestudieswereeditedbyBruceRoss-LarsonanddesignedandproducedbyGerryQuinn.
Theprojectwasmadepossiblebythegenerouscontributionofmorethan100publicofficials,lawyersand
businesspeople:
EgyPt FyR MACEDonIA
AshrafAlArabi MileBoskov
Deputy Minister for Tax Policy President of the Confederation of the Employers of
the Republic of Macedonia
AmrELmonayer
Senior Assistant to Deputy Minister of Finance MarkoCulev
part-time employee at fX3X
MohamedFahim
PriceWaterhouseCoopers, Cairo MilivojeDzordevic
Manager and owner of fX3X
SherifMansour
PriceWaterhouseCoopers, Cairo NikolaEftimov
Federation of Trade Unions of Macedonia (SSM)
GeertenMichielse
Economist, International Monetary Fund DraganJovanovski
Head of the legal department of a labor union
TerrenceMurdoch
USAID, Cairo ValentinoKonstantinovski
Manager and owner of Etapa Project
VictorThuronyi
International Monetary Fund ArvoKuddo
Senior Economist, World Bank
EL SALvADoR
SlagjanMijalovski
MayradeMor�n Manager and owner of Infinite Solultions
Director of the Commission for the Study
of Reforms to the Commercial Code EvgenijNajdov
Economist, World Bank, Skopje
FelixSafie
Director, the National Central Registry AcoSpasevski
Macedonian Chamber of Commerce
ManueldelValle
Director of the Commercial Registry (June 2003) DarkoVelkov
Manager of Vrabotuvanje.com (Employment.com) and
EduardoZablah-Touche owner with Vrabotuvanje Leasing
Head of the Technical Secretariat of the Presidency
Acknowledgements
MExICo Alh.MuktariA.Tambawel
Deputy Director at the National Judicial Council
JorgeFamiliarCalder�n
Executive Director, World Bank YemiOsinbajo
Attorney General & Commissioner for Justice of Lagos
Jos�AntonioGonz�lezAnaya State
Director General, Securities & Insurance, Ministry of
Finance EmiolaOyefuga
Senior State Program Officer, UK DFID Security,
EugeniaGonz�lezRivas Justice and Growth Program Nigeria
Junior Partner, Goodrich, Riquelme y Asociados
PAkIStAn
YvesHayaux-du-TillyLaborde
Partner, Jauregu�, Navarrete y Nader S.C. ManzoorAhmad
Ambassador and Permanent Representative
JorgeS�nchez of Pakistan to the WTO
Junior Partner, Goodrich, Riquelme y Asociados
SERbIA
nIgERIA
JayAllen,MilosBalti,NatasaCvetianin,
HabeebAdewaleOlumuyiwaAbiru PredragDejanovi
Judge in the Land Division at the Lagos High Court Attorney at Law, Ninkovi Law Office
AugustineAdetulaAde-Alabi AleksandarDmitrov
Chief Judge of Lagos State Attorney at Law, Prica & Partners
AdolphousAkwumakwuhie Nikolaorevi
Associate attorney at Aluke & Oyebode Attorney at Law, Jankovi, Popovi & Miti
JoannaKataBlackman JelenaEdelman
Consultant, World Bank Attorney at Law, Prica & Partners
AbisoyeEstherAyo JelenaGazivoda
Judge in the Commercial Division at the Lagos High Attorney at Law, Jankovi, Popovi & Miti
Court in charge of the CAIS project
RobertGourley
AnseAguEzetah Senior Private Sector Development Specialist, The
Partner at Chief Law Agu Ezetah & Co. World Bank, Advisor to the Privatization Agency of
the Ministry of Economy
TundeFagbohunlu
Attorney at Aluko & Oyebode, former member on the HugoGreen
Committee establishing the 2004 High Court Rules Advisor to the Serbian Privatisation Agency
Bankruptcy Unit and to Serbian Bankruptcy
JeanPaulGauthier Supervision Agency
Consultant, World Bank
JovanJovanovi
DanladiHalilu Director, Bankruptcy Supervision Agency of the
Secretary at the National Judicial Council Republic of Serbia
AdeIpaye BiljanaKozlovic
Senior Special Assistant (Legal Matters) to the Advisor, USAID-Serbian Enterprise Development
Governor of Lagos State Project
O.AtinukeIpaye BrankaKuli
Judge in the Commercial Division at the Lagos High Deputy Director, Bankruptcy Supervision Agency of
Court the Republic of Serbia
Acknowledgements
RadomirLazarevi DraganaStanojevic
President, High Commercial Court of the Republic of Deputy Chief of Party, USAID/Bankruptcy and
Serbia Enforcement Strengthening Activity (BES)
AndrejaMarusic MiloStevanovi,ChiefofParty
Attorney at Law, Council for Regulatory reform and Bankruptcy and Enforcement Strengthening, Com-
Chair of the Board of SBRA mercial Court Administration Strengthening Activity,
Booz Allen Hamilton
MihajloPrica
Attorney at Law, Prica & Partners JelisavetaVasili
former Justice, High Commercial Court of the Republic
MajaPiscevic of Serbia
Senior Legal Advisor, Economics and Governance
Office USAID/ US Embassy Belgrade DjordjeVukotic
Attorney at Law, Council for Regulatory Reform
MomirRadic
Attorney at Law, Radic Law Office TanjaUnguran
Attorney at Law, CMS Reich-Rohrwig Hasche Sigle
d.o.o.
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