91914 Doing Business 2015 Belarus Economy Profile 2015 Belarus Doing Business 2015 Belarus 2 © 2014 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org All rights reserved. 1 2 3 4 17 16 15 14 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2015 Belarus 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 6 Starting a business ..................................................................................................................... 16 Dealing with construction permits ........................................................................................... 23 Getting electricity ....................................................................................................................... 34 Registering property .................................................................................................................. 41 Getting credit .............................................................................................................................. 49 Protecting minority investors ................................................................................................... 56 Paying taxes ................................................................................................................................ 65 Trading across borders .............................................................................................................. 70 Enforcing contracts .................................................................................................................... 75 Resolving insolvency .................................................................................................................. 82 Labor market regulation ........................................................................................................... 87 Distance to frontier and ease of doing business ranking ...................................................... 94 Resources on the Doing Business website .............................................................................. 97 Doing Business 2015 Belarus 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is 1, 2014 (except for the paying taxes indicators, which for a local entrepreneur to open and run a small to cover the period January–December 2013). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 11 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, getting trading across borders and getting electricity), the credit, protecting minority investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and labor market regulation. macroeconomic conditions or the underlying strength of In a series of annual reports Doing Business presents institutions—are not directly studied by Doing Business. quantitative indicators on business regulations and the The indicators refer to a specific type of business, protection of property rights that can be compared generally a local limited liability company operating in across 189 economies, from Afghanistan to Zimbabwe, the largest business city. Because standard assumptions over time. The data set covers 47 economies in Sub- are used in the data collection, comparisons and Saharan Africa, 32 in Latin America and the Caribbean, 25 benchmarks are valid across economies. The data not in East Asia and the Pacific, 26 in Eastern Europe and only highlight the extent of obstacles to doing business; Central Asia, 20 in the Middle East and North Africa and they also help identify the source of those obstacles, 8 in South Asia, as well as 31 OECD high-income supporting policy makers in designing regulatory reform. economies. The indicators are used to analyze economic More information is available in the full report. Doing outcomes and identify what reforms have worked, where Business 2015 presents the indicators, analyzes their and why. relationship with economic outcomes and presents This economy profile presents the Doing Business business regulatory reforms. The data, along with indicators for Belarus. To allow useful comparison, it also information on ordering Doing Business 2015, are provides data for other selected economies (comparator available on the Doing Business website at economies) for each indicator. The data in this report are http://www.doingbusiness.org. current as of June Doing Business 2015 Belarus 5 CHANGES IN DOING BUSINESS 2015 As part of a 2-year update in methodology, Doing Finally, the name of the employing workers indicator set Business 2015 incorporates 7 important changes. First, has been changed to labor market regulation, and the the ease of doing business ranking as well as all topic- scope of this indicator set has also been changed. The level rankings are now computed on the basis of indicators now focus on labor market regulation distance to frontier scores (see the chapter on the applying to the retail sector rather than the distance to frontier and ease of doing business ranking). manufacturing sector, and their coverage has been Second, for the 11 economies with a population of more expanded to include regulations on labor disputes and than 100 million, data for a second city have been added on benefits provided to workers. The labor market to the data set and the ranking calculation. These regulation indicators continue to be excluded from the economies are Bangladesh, Brazil, China, India, aggregate distance to frontier score and ranking on the Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian ease of doing business. Federation and the United States. Third, for getting Beyond these changes there are 3 other updates in credit, the methodology has been revised for both the methodology. For paying taxes, the financial statement strength of legal rights index and the depth of credit variables have been updated to be proportional to 2012 information index. The number of points has been income per capita; previously they were proportional to increased in both indices, from 10 to 12 for the strength 2005 income per capita. For enforcing contracts, the of legal rights index and from 6 to 8 for the depth of value of the claim is now set at twice the income per credit information index. In addition, only credit bureaus capita or $5,000, whichever is greater. For dealing with and registries that cover at least 5% of the adult construction permits, the cost of construction is now set population can receive a score on the depth of credit at 50 times income per capita (before, the cost was information index. assessed by the Doing Business respondents). In addition, Fourth, the name of the protecting investors indicator set this indicator set no longer includes the procedures for has been changed to protecting minority investors to obtaining a landline telephone connection. better reflect its scope—and the scope of the indicator For more details on the changes, see the “What is set has been expanded to include shareholders’ rights in changing in Doing Business?” chapter starting on page corporate governance beyond related-party transactions. 24 of the Doing Business 2015 report. For more details Fifth, the resolving insolvency indicator set has been on the data and methodology, please see the “Data expanded to include an index measuring the strength of Notes” chapter starting on page 114 of the Doing the legal framework for insolvency. Sixth, the calculation Business 2015 report. For more details on the distance to of the distance to frontier score for paying taxes has frontier metric, please see the “Distance to frontier and been changed. The total tax rate component now enters ease of doing business ranking” chapter in this profile. the score in a nonlinear fashion, in an approach different from that used for all other indicators (see the chapter on the distance to frontier and ease of doing business ranking). Doing Business 2015 Belarus 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing business Region: Europe & Central Asia based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: Upper middle income businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of doing business ranking. This Population: 9,466,000 year's report presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 6,720 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier (DTF) scores. DB2015 rank: 57 The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute DB2014 rank: 57* distance to the best performance in each Doing Business Change in rank: 0 indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the DB 2015 DTF: 68.3 worst performance and 100 the frontier. (See the chapter on the distance to frontier and ease of doing business). DB 2014 DTF: 67.1 The 10 topics included in the ranking in Doing Business 2015: starting a business, dealing with construction Change in DTF: 1.2 permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading * DB2014 ranking shown is not last year’s published across borders, enforcing contracts and resolving ranking but a comparable ranking for DB2014 that insolvency. The labor market regulation indicators captures the effects of such factors as data (formerly employing workers) are not included in this corrections and the changes in methodology. See year’s aggregate ease of doing business ranking, but the the data notes starting on page 114 of the Doing data are presented in this year’s economy profile. Business 2015 report for sources and definitions. The aggregate ranking on the ease of doing business benchmarks each economy’s performance on the indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2015 Belarus THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2015 Belarus THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How Belarus and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 Belarus 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Belarus (Scale: Rank 189 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - Belarus (Scale: Score 0 center, Score 100 outer edge) Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 Belarus 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business tells Doing Business introduced the distance to frontier score. This only part of the story, so do changes in that ranking. Yearly measure shows how far on average an economy is from the movements in rankings can provide some indication of best performance achieved by any economy on each Doing changes in an economy’s regulatory environment for firms, Business indicator. but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed in over time—how far it has moved toward (or away from) the different areas. To aid in assessing such changes, most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has Belarus come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2010, except for getting credit, paying taxes, protecting minority investors and resolving insolvency which had methodology changes in 2014 and thus are only comparable to 2013. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 114 of the Doing Business 2015 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2015 Belarus 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for Belarus Best performer globally Russian Federation Lithuania DB2015 Georgia DB2015 Ukraine DB2015 Belarus DB2015 Belarus DB2014 Poland DB2015 Indicator Latvia DB2015 DB2015 DB2015 Starting a Business 40 35 5 36 11 85 34 76 New Zealand (1) (rank) Starting a Business (DTF 91.88 91.88 97.73 92.12 96.22 85.79 92.17 87.35 New Zealand (99.96) Score) Procedures (number) 5.0 5.0 2.0 4.0 3.0 4.0 4.4 6.0 New Zealand (1.0)* Time (days) 9.0 9.0 2.0 12.5 3.5 30.0 11.2 21.0 New Zealand (0.5) Cost (% of income per 0.8 0.8 3.4 3.6 0.7 12.9 1.2 1.2 Slovenia (0.0) capita) Paid-in min. capital (% 0.0 0.0 0.0 0.0 0.0 12.3 0.0 0.0 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 51 54 3 47 15 137 156 70 China (1) (rank) Dealing with Hong Kong SAR, Construction Permits 78.20 77.82 91.44 78.38 85.27 62.97 56.70 75.29 China (95.53) (DTF Score) Doing Business 2015 Belarus 12 Best performer globally Russian Federation Lithuania DB2015 Georgia DB2015 Ukraine DB2015 Belarus DB2015 Belarus DB2014 Poland DB2015 Indicator Latvia DB2015 DB2015 DB2015 Hong Kong SAR, Procedures (number) 14.0 14.0 8.0 12.0 11.0 19.0 19.8 8.0 China (5.0) Time (days) 114.0 121.0 68.5 149.0 91.0 212.0 238.4 64.0 Singapore (26.0) Cost (% of warehouse 0.8 0.6 0.3 0.3 0.3 0.3 1.9 10.2 Qatar (0.0)* value) Getting Electricity 148 144 37 89 105 64 143 185 Korea, Rep. (1) (rank) Getting Electricity (DTF 59.90 59.62 84.69 74.58 71.46 79.19 60.89 32.65 Korea, Rep. (99.83) Score) Procedures (number) 7.0 7.0 4.0 5.0 5.0 3.0 5.6 10.0 12 Economies (3.0)* Time (days) 131.0 131.0 71.0 108.0 137.0 161.0 179.1 277.0 Korea, Rep. (18.0)* Cost (% of income per 364.1 431.7 503.8 308.2 45.5 20.8 321.0 165.5 Japan (0.0) capita) Registering Property 3 3 1 32 9 39 12 59 Georgia (1) (rank) Registering Property 96.67 96.69 99.88 81.69 92.39 80.30 91.27 74.82 Georgia (99.88) (DTF Score) Procedures (number) 2.0 2.0 1.0 5.0 3.0 6.0 3.0 7.0 4 Economies (1.0)* Time (days) 4.0 4.0 1.0 18.0 2.5 33.0 19.0 27.0 3 Economies (1.0)* Cost (% of property 0.0 0.0 0.1 2.0 0.8 0.3 0.1 2.0 4 Economies (0.0)* value) Getting Credit (rank) 104 99 7 23 23 17 61 17 New Zealand (1) Getting Credit (DTF 40.00 40.00 85.00 70.00 70.00 75.00 55.00 75.00 New Zealand (100) Score) Strength of legal rights 2 2 9 9 6 7 4 8 3 Economies (12)* index (0-12) Doing Business 2015 Belarus 13 Best performer globally Russian Federation Lithuania DB2015 Georgia DB2015 Ukraine DB2015 Belarus DB2015 Belarus DB2014 Poland DB2015 Indicator Latvia DB2015 DB2015 DB2015 Depth of credit 6 6 8 5 8 8 7 7 23 Economies (8)* information index (0-8) Credit registry coverage 64.5 60.3 0.0 76.8 28.8 0.0 0.0 0.0 Portugal (100.0) (% of adults) Credit bureau coverage 0.0 0.0 56.8 0.0 97.7 84.3 64.6 48.0 23 Economies (100.0)* (% of adults) Protecting Minority 94 91 43 49 78 35 100 109 New Zealand (1) Investors (rank) Protecting Minority 51.67 51.67 60.83 60.00 55.00 62.50 50.83 48.33 New Zealand (81.67) Investors (DTF Score) Extent of conflict of interest regulation 5.0 5.0 7.3 5.7 6.0 6.0 5.0 4.0 Singapore (9.3)* index (0-10) Extent of shareholder governance index (0- 5.3 5.3 4.8 6.3 5.0 6.5 5.2 5.7 France (7.8)* 10) Strength of minority investor protection 5.2 5.2 6.1 6.0 5.5 6.3 5.1 4.8 New Zealand (8.2) index (0-10) United Arab Emirates Paying Taxes (rank) 60 107 38 24 44 87 49 108 (1)* Paying Taxes (DTF United Arab Emirates 78.29 69.61 82.76 86.19 81.24 73.51 80.63 70.33 Score) (99.44)* Payments (number per Hong Kong SAR, 7.0 10.0 5.0 7.0 11.0 18.0 7.0 5.0 year) China (3.0)* Time (hours per year) 183.0 319.0 362.0 193.0 175.0 286.0 168.0 350.0 Luxembourg (55.0) Trading Across Borders 145 146 33 28 21 41 155 154 Singapore (1) (rank) Trading Across Borders 59.09 56.77 84.02 85.36 87.21 81.80 53.58 53.96 Singapore (96.47) Doing Business 2015 Belarus 14 Best performer globally Russian Federation Lithuania DB2015 Georgia DB2015 Ukraine DB2015 Belarus DB2015 Belarus DB2014 Poland DB2015 Indicator Latvia DB2015 DB2015 DB2015 (DTF Score) Documents to export 8 8 4 5 4 5 9 8 Ireland (2)* (number) Time to export (days) 15.0 15.0 9.0 10.0 10.0 15.0 21.1 29.0 5 Economies (6.0)* Cost to export (US$ per 1,460.0 1,460.0 1,355.0 600.0 750.0 1,050.0 2,400.5 1,880.0 Timor-Leste (410.0) container) Cost to export (deflated 1,460.0 1,741.9 1,355.0 600.0 750.0 1,050.0 2,400.5 1,880.0 US$ per container) Documents to import 10 10 4 5 5 4 10 9 Ireland (2)* (number) Time to import (days) 30.0 30.0 10.0 11.0 9.0 14.0 19.4 28.0 Singapore (4.0) Cost to import (US$ per 2,265.0 2,265.0 1,595.0 801.0 800.0 1,025.0 2,594.5 2,455.0 Singapore (440.0) container) Cost to import (deflated 2,265.0 2,702.3 1,595.0 801.0 800.0 1,025.0 2,594.5 2,455.0 US$ per container) Enforcing Contracts 7 7 23 16 14 52 14 43 Singapore (1) (rank) Enforcing Contracts 78.70 78.70 71.82 75.59 75.85 64.83 75.85 66.25 Singapore (89.54) (DTF Score) Time (days) 275.0 275.0 285.0 469.0 300.0 685.0 267.0 378.0 Singapore (150.0) Cost (% of claim) 23.4 23.4 29.9 23.1 23.6 19.4 14.9 46.3 Iceland (9.0) Procedures (number) 29.0 29.0 33.0 27.0 31.0 33.0 35.0 30.0 Singapore (21.0)* Resolving Insolvency 68 66 122 40 67 32 65 142 Finland (1) (rank) Resolving Insolvency 48.18 48.00 36.48 63.42 48.47 69.73 49.69 31.17 Finland (93.85) (DTF Score) Doing Business 2015 Belarus 15 Best performer globally Russian Federation Lithuania DB2015 Georgia DB2015 Ukraine DB2015 Belarus DB2015 Belarus DB2014 Poland DB2015 Indicator Latvia DB2015 DB2015 DB2015 Time (years) 3.0 2.0 1.5 2.3 3.0 2.0 2.9 Ireland (0.4) Cost (% of estate) 22.0 22.0 10.0 10.0 10.0 15.0 9.0 42.0 Norway (1.0) Outcome (0 as piecemeal sale and 1 as 1 1 0 0 0 1 0 0 going concern) Recovery rate (cents on 37.3 36.9 38.7 48.2 43.6 57.0 43.0 8.6 Japan (92.9) the dollar) Strength of insolvency 9.0 9.0 5.0 12.0 8.0 12.5 8.5 8.5 5 Economies (15.0)* framework index (0-16) Note: DB2014 rankings shown are not last year’s published rankings but comparable rankings for DB2014 that capture the effects of s uch factors as data corrections and changes to the methodology. Trading across borders deflated and non-deflated values are identical in DB2015 because it is defined as the base year for the deflator. The best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2015 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2015 Belarus 16 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city 1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Time required to complete each procedure generating more revenue for the government. (calendar days) What do the indicators cover? Does not include time spent gathering information Doing Business measures the ease of starting a business in an economy by recording all procedures Each procedure starts on a separate day (2 officially required or commonly done in practice by procedures cannot start on the same day). an entrepreneur to start up and formally operate an Procedures that can be fully completed industrial or commercial business—as well as the online are recorded as ½ day. time and cost required to complete these procedures. Procedure completed once final document is It also records the paid-in minimum capital that received companies must deposit before registration (or within 3 months). The ranking of economies on the No prior contact with officials ease of starting a business is determined by sorting Cost required to complete each procedure their distance to frontier scores for starting a (% of income per capita) business. These scores are the simple average of the distance to frontier scores for each of the component Official costs only, no bribes indicators. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business:  Is a limited liability company, located in the  Has a start-up capital of 10 times income per largest business city and is 100% domestically capita. owned . 1  Has a turnover of at least 100 times income per  Has between 10 and 50 employees. capita.  Conducts general commercial or industrial  Does not qualify for any special benefits. activities.  Does not own real estate. 1 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 Belarus 17 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Belarus? largest business city of an economy, except for 11 According to data collected by Doing Business, starting a economies for which the data are a population-weighted business there requires 5.0 procedures, takes 9.0 days, average of the 2 largest business cities. See the chapter costs 0.8% of income per capita and requires paid-in on distance to frontier and ease of doing business minimum capital of 0.0% of income per capita (figure ranking at the end of this profile for more details. 2.1). Most indicator sets refer to a case scenario in the Figure 2.1 What it takes to start a business in Belarus - Paid-in minimum capital (% of income per capita): 0.0 Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Belarus 18 STARTING A BUSINESS Globally, Belarus stands at 40 in the ranking of 189 average ranking provide other useful information for economies on the ease of starting a business (figure 2.2). assessing how easy it is for an entrepreneur in Belarus to The rankings for comparator economies and the regional start a business. Figure 2.2 How Belarus and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2015 Belarus 19 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in Belarus (table 2.1)? Table 2.1 How has Belarus made starting a business easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Belarus made starting a business easier by simplifying registration formalities, abolishing the minimum capital DB2010 requirement, limiting the role of notaries and eliminating the need for approval of the company seal. Belarus made starting a business more difficult by increasing DB2013 the cost of business registration and the cost to obtain a company seal. Belarus made starting a business easier by reducing the DB2014 registration fees and eliminating the requirement for an initial capital deposit at a bank before registration. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Belarus 20 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Belarus is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new Legal form: Private Limited Company firm. These are identified by Doing Business through collaboration with relevant local professionals and Paid in minimum capital requirement: EUR 0 the study of laws, regulations and publicly available City: Minsk information on business entry in that economy. Following is a detailed summary of those procedures, Start-up Capital: 10 times GNI per capita along with the associated time and cost. These procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Table 2.2 Summary of time, cost and procedures for starting a business in Belarus - Time to No. Procedure Cost to complete complete Obtain an approval of the company name with the Registry Office Since September 1, 2011 it is possible for companies situated in Minsk to obtain approval of the company's name on-line through the web- portal of the State Register at www.egr.gov.by (Electronic registration 1 day no charge 1 legalized by the Decree N. 5 of 27 June, 2011). Agency: Registry Office Business registration with the State Registry According to the point 25 of the Decree No.1 the actual registration takes 1 day by law but up to 5 days in practice. After that the representative of the state registry during 5 working days (7 calendar days) should inform state agencies of the company's registration (tax agencies, state insurance agency RUP ""Belgosstrakh"", statistics agency, Social Security Fund). According to the amendments to the Civil Code and Companies act, a BYR 390,000 2 5 days Private Limited Company is no longer required to have a Memorandum of Association and may now register only with Articles of Association. The amount of cost depends on the size of base quantity, valid by the day of registration, and equals to 3 base quantities. Since October 01, 2013 the cost of the base unit is BYR 130,000. Agency: State Registry Doing Business 2015 Belarus 21 Time to No. Procedure Cost to complete complete Receive confirmation of registration with the Social Security Fund, RUP Belgosstrakh and Tax Inspection After the registration of the company a letter needs to be sent to the Social Security Fund, RUP Belgosstrakh (professional insurance body) and Tax Agencies. Usually Registry Office sends this letter. By law the time is 7 days. In this letter an entrepreneur needs to indicate information about the director, chief accountant, settlement accounts of the company in a bank and other relevant information. 3 1 day no charge Some of the administrative bodies require copies of constituent documents, orders on appointment of director/chief accountant, their employment contracts and some other documents. An entrepreneur must receive from registering state authority certificates approving registration with tax authority and other controlling bodies (within 5 working days after state registration). Agency: Social Security Fund, RUP Belgosstrakh and Tax Inspection Make a company seal There are no laws requiring a business to purchase company seal. However, the company seal is required for consignment notes and for certain bank transactions and power of attorney. Government agencies, such as the tax authority, would have no legal grounds for refusing documents that do not have a company seal. Nevertheless out of habit, BYR 100,000- 4 1 day most limited liability companies would purchase a seal. In addition, for 200,000 the purpose of opening a bank account, it is required to make a company seal. Agency: Seal maker Open a regular bank account and pay a statutory fund before filing documents at the State Registry As of May 01, 2013, based on Article 7 of Regulations on State Registration of Entrepreneurs, adopted by the Decree of the President of the Republic of Belarus No 2., dated January 24, 2012, the share capital of the Company shall be paid in full within a period of 12 months from the date of company registration. 5 1 day no charge Under Article 2.4 of the Regulation on State Registration of Entrepreneurs, after opening the regular bank account, the Company shall not submit any notices (with bank account details) to Social Security Fund, Insurance and Tax authorities. It is the bank that should notify the aforesaid agencies about the Company's opening of a bank account. Doing Business 2015 Belarus 22 Time to No. Procedure Cost to complete complete Agency: Commercial Bank * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Belarus 23 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records the procedures, time and cost Obtaining utility connections for water and for a business in the construction industry to obtain sewerage all the necessary approvals to build a warehouse in Registering the warehouse after its the economy’s largest business city, connect it to completion (if required for use as collateral or basic utilities and register the warehouse so that it for transfer of the warehouse) can be used as collateral or transferred to another Time required to complete each procedure entity. (calendar days) The ranking of economies on the ease of dealing with Does not include time spent gathering construction permits is determined by sorting their information distance to frontier scores for dealing with Each procedure starts on a separate day. construction permits. These scores are the simple Procedures that can be fully completed online average of the distance to frontier scores for each of are recorded as ½ day. the component indicators. Procedure considered completed once final To make the data comparable across economies, document is received Doing Business uses several assumptions about the business and the warehouse, including the utility No prior contact with officials connections. Cost required to complete each procedure (% The business: of warehouse value) Official costs only, no bribes  Is a limited liability company operating in the construction business and located in  Will have complete architectural and the largest business city. For the 11 technical plans prepared by a licensed economies with a population of more than architect or engineer. 100 million, data for a second city have  Will be connected to water and sewerage been added. Is domestically owned and (sewage system, septic tank or their operated. equivalent). The connection to each utility  Has 60 builders and other employees. network will be 150 meters (492 feet) long. The warehouse:  Will be used for general storage, such as of books or stationery (not for goods requiring  Is valued at 50 times income per capita. special conditions).  Is a new construction (there was no  Will take 30 weeks to construct (excluding all previous construction on the land). delays due to administrative and regulatory requirements). Doing Business 2015 Belarus 24 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build an economy, except for 11 economies for which the data a warehouse in Belarus? According to data collected by are a population-weighted average of the 2 largest Doing Business, dealing with construction permits there business cities. See the chapter on distance to frontier requires 14.0 procedures, takes 114.0 days and costs and ease of doing business ranking at the end of this 0.8% of the warehouse value (figure 3.1). Most indicator profile for more details. sets refer to a case scenario in the largest business city of Figure 3.1 What it takes to comply with formalities to build a warehouse in Belarus - Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Belarus 25 DEALING WITH CONSTRUCTION PERMITS Globally, Belarus stands at 51 in the ranking of 189 economies and the regional average ranking provide economies on the ease of dealing with construction other useful information for assessing how easy it is for permits (figure 3.2). The rankings for comparator an entrepreneur in Belarus to legally build a warehouse. Figure 3.2 How Belarus and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2015 Belarus 26 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while an effort to ensure building safety while keeping making compliance easy and accessible to all. Coherent compliance costs reasonable, governments around the and transparent rules, efficient processes and adequate world have worked on consolidating permitting allocation of resources are especially important in sectors requirements. What construction permitting reforms has where safety is at stake. Construction is one of them. In Doing Business recorded in Belarus (table 3.1)? Table 3.1 How has Belarus made dealing with construction permits easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Belarus made dealing with construction permits easier by DB2010 simplifying the environmental and project design approval processes. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Belarus 27 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Belarus are based BUILDING A WAREHOUSE on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Estimated cost of information collected from experts in construction BYR 3,233,059,083 construction : licensing, including architects, civil engineers, construction lawyers, construction firms, utility City : Minsk service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and cost, that apply to a company and structure matching the are summarized below. standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in Belarus - Time to No. Procedure Cost to complete complete Obtain a decision of the Minsk City Executive Committee permitting project design and construction works on a given land plot To start construction, BuildCo must receive the Minsk City Executive Committee’s decision to elaborate on design documentation. The permission letter states the main requirements for the intended building and lists the agencies and the institutions where additional technical requirements must be obtained. The request form must contain a brief description of the intended building project and company documents. On April 26, 2007 the Minsk City Municipality passed Decision # 859 according to which applicants can choose to obtain technical conditions or request the Centre of Engineering Services to obtain them on behalf of the applicant. Prior to this reform, the Centre used to be under the Department of Technical Conditions of the Committee of 1 Architecture and City Construction. Now the Centre operates as a semi- 30 days no charge private entity and if the work load increases, it can recruit additional human resources. Another significant improvement is that the Centre could not receive payments in advance when it was a state entity. This led to serious delays and lack of funds for paying the consultants. Now applicants can pay the Centre in advance and secure fast service. The Centre does not provide a fast track service yet. After the documents are submitted to the Reception Desk they are forwarded to the respective departments, and if the applicant wishes to obtain the technical conditions through the Centre, the documents are directed internally to the Centre. Changes to the Resolution of the Cabinet of Ministers N 223 (February 20, 2008) “On Some Measures to Improving Architectural and Construction Activity” have been recorded to have impact on all pre- approval procedures. Specifically, the procedure for obtaining the Architectural and Planning Terms (APZ in Russian) prior to changes in Doing Business 2015 Belarus 28 Time to No. Procedure Cost to complete complete the above Resolution used to be 30 calendar days. Now the official time-limit is 20 working days which is the same number of days. However, often cases as simple as the one in the Doing Business case study are cleared in 20 calendar days, before the official time-limit expires. The City of Minsk and its Committee of Architecture and City Construction have obtained sophisticated equipment for scanning drawings and plans. Internally, all respective departments have access to this network that allows them view updates to the cadastre. Since 2004 the City of Minsk and its Committee of Architecture and City Construction work under a new software system that allows all internal documentation to be controlled for time-limit compliance. Time limits are strictly followed and enforced by the authority. However, if they are not respected, the silence-is-consent rule does not apply. But they can resort to writing a formal complaint to the Head of Committee and to the State Control Authority. The latter is a special body that is responsible for ensuring the compliance of all state authorities with existing legislation. Besides an administrative penalty and fine of 300 minimal base indices, the officials may be charged with criminal offense. All services that issue technical conditions have a time limit of 7 working days during which the approvals must be granted. All the approvals can be obtained in parallel. The services that are involved and would be required for BuildCo’s case are: water/sewage, telephone, sanitary epidemiological authority, ecological department and fire safety. By law all technical conditions are granted free of charge. However, if it is done through the Centre for Engineering Services there is an fee -- for BuildCo's case, it would be approximately BYR 1,000,000.00. Agency: Minsk City Executive Committee * Request and obtain technical conditions from the water and sewage authority The applicants can choose to obtain technical conditions from each agency individually or to request them from the Centre of Engineering Services, which can obtain the technical conditions on behalf of applicant. However, it is very rare that building companies will choose to ask the technical conditions from the Centre of Engineering Services. The overwhelming majority of building companies obtain the technical conditions on their own. According to construction professionals, it is in 2 the best interest of building companies to obtain the technical 14 days no charge conditions on their own to ensure that the technical conditions are issued in the most optimal manner for the building company. All services that issue technical conditions have a time-limit of 7 working days during which the approvals must be granted. However, in practice it might take on average 2 weeks. All the technical conditions can be obtained in parallel. Agency: Unitary enterprise "Minskvodokanal" Doing Business 2015 Belarus 29 Time to No. Procedure Cost to complete complete * Request and obtain technical conditions from the natural gas provider "Mingaz" The applicants can choose to obtain technical conditions from each agency individually or to request them from the Centre of Engineering Services, which can obtain the technical conditions on behalf of applicant. However, it is very rare that building companies will choose to ask the technical conditions from the Centre of Engineering Services. The overwhelming majority of building companies obtain the technical conditions on their own. According to construction professionals, it is in the best interest of building companies to obtain the technical conditions on their own to ensure that the technical conditions are issued in the most optimal manner for the building company. 14 days no charge 3 All services that issue technical conditions have a time-limit of 7 working days during which the approvals must be granted. However, in practice it might take on average 2 weeks. All the technical conditions can be obtained in parallel. Even though BuildCo will not connect to natural gas service, technical conditions from the Mingaz are necessary because they will specify that there are no pipelines on the land plot or near its borders. Agency: Mingaz * Request and obtain technical conditions for fire safety from Minsk City Department of the Ministry of Emergency Situations The applicants can choose to obtain technical conditions from each agency individually or to request them from the Centre of Engineering Services, which can obtain the technical conditions on behalf of applicant. However, it is very rare that building companies will choose to ask the technical conditions from the Centre of Engineering Services. The overwhelming majority of building companies obtain the technical conditions on their own. According to construction professionals, it is in the best interest of building companies to obtain the technical 14 days no charge 4 conditions on their own to ensure that the technical conditions are issued in the most optimal manner for the building company. All services that issue technical conditions have a time-limit of 7 working days during which the approvals must be granted. However, in practice it might take on average 2 weeks. All the technical conditions can be obtained in parallel. Agency: Minsk City Department of the Ministry of Emergency Situations Doing Business 2015 Belarus 30 Time to No. Procedure Cost to complete complete * Request and obtain technical conditions from the Traffic Control Department of the Minsk City Executive Committee The applicants can choose to obtain technical conditions from each agency individually or to request them from the Centre of Engineering Services, which can obtain the technical conditions on behalf of applicant. However, it is very rare that building companies will choose to ask the technical conditions from the Centre of Engineering Services. The overwhelming majority of building companies obtain the technical conditions on their own. According to construction professionals, it is in the best interest of building companies to obtain the technical 5 conditions on their own to ensure that the technical conditions are 14 days no charge issued in the most optimal manner for the building company. All services that issue technical conditions have a time-limit of 7 working days during which the approvals must be granted. However, in practice it might take on average 2 weeks. All the technical conditions can be obtained in parallel. Agency: Traffic Control Department of the Minsk City Executive Committee * Request and obtain technical conditions from the Minsk City Committee for Natural Resources & Environment The applicants can choose to obtain technical conditions from each agency individually or to request them from the Centre of Engineering Services, which can obtain the technical conditions on behalf of applicant. However, it is very rare that building companies will choose to ask the technical conditions from the Centre of Engineering Services. The overwhelming majority of building companies obtain the technical conditions on their own. According to construction professionals, it is in the best interest of building companies to obtain the technical 6 conditions on their own to ensure that the technical conditions are 14 days no charge issued in the most optimal manner for the building company. All services that issue technical conditions have a time-limit of 7 working days during which the approvals must be granted. However, in practice it might take on average 2 weeks. All the technical conditions can be obtained in parallel. Agency: Minskzelenstroy (Minsk City Committee for Natural Resources & Environment) Obtain state expertise of design documentation Upon developing its design documentation, BuildCo submits it to the Minsk City State Expertise Authority for state approval. The state expertise can be conducted in parallel with the ecological expertise. The 30 days BYR 8,308,962 7 State Expertise Authority does not look at ecological aspects of construction documents. According to Resolution of Ministry of Architecture and Construction of Belarus #55 as of December 12, 2008, enacted 3 February 2009, for a Doing Business 2015 Belarus 31 Time to No. Procedure Cost to complete complete project with a cost of BYR 272,149,592 (10% of total project cost), the fee would be applied at a rate of 2.57%. This amount is approximate and depends on the applicable conversion rate of the basal value in the current project. Agency: Minsk City State Expertise Authority Obtain the building permit BuildCo applies to the Inspection of State Construction Supervision Department of Minsk City (from hereon, "the Inspection") to obtain a permit for construction and mounting works. The following documents must be submitted: • Decision of Minsk City Executive Committee on permission of construction; • Positive conclusion of the state examination of the project documentation; • Decision on the approval of the project documentation; • Payment order confirming the transfer of the fees payable from the cost of construction and installation work. The construction permit is granted within 3 working days according to the Resolution of the Council of Ministers of Belarus No.156 of February 17, 2012 "On approval of a single specification of administrative procedures carried out by government agencies and other bodies in relation to legal entities and individual entrepreneurs". According to the Regulations on the financing of the Department of Inspection of Control and Supervision of the Construction of the State 8 Committee for Standardization, approved by the Council of Ministers of 3 days BYR 5,657,853 the Republic of Belarus of 09.08.2013 № 704, the fee to obtain the building permit is 0.35% of the value of the construction and engineering works for projects with private sector financing. For construction projects with an estimated duration of 12 months or less, an advance payment of 50% of the total estimated amount of the payment must be paid during the application for construction permit. The remaining 50% of the fees is paid before obtaining the occupancy permit. The payment is done at the bank, and a receipt is submitted to the Inspection. The duration of the construction works for the case study warehouse is assumed to be 30 weeks; therefore, 50% of the construction and installation costs have to be paid at the time of applying for the building permit. If no complaints are filed on behalf of neighbors during the 6 months of construction BuildCo may never receive inspection from the Inspection. The Inspection has only 40 inspectors who issue approval of permits and conduct inspections. The average count of sites per inspector is 30 per month. If the inspector shows up BuildCo can continue its works without interruption. The inspector will look at compliance of existing documents and the actual works and records of BuildCo’s own inspectors. Once the building is completed BuildCo will submit a written request to Doing Business 2015 Belarus 32 Time to No. Procedure Cost to complete complete the Inspection of State Construction Supervision Department of Minsk City. This inspection happens before the general inspection, as the Inspection must submit its findings to other authorities and investors. During the inspection the authority looks at the technical passport and the architect's records and must issue its conclusion within 15 working days. Agency: Minsk City Inspectorate of the Department of Construction Control and Supervision Apply for water and sewerage connection Water and sewerage connections are obtained during construction. First step for BuildCo is to apply to Minskvodokanal requesting a 9 signing of a contract and connection to the water and sewage network. 1 day BYR 284,378 Agency: Unitary enterprise "Minskvodokanal" Receive on-site inspection for water and sewerage connection Minskvodokanal conducts an inspection of the construction. 10 1 day no charge Agency: Unitary enterprise "Minskvodokanal" Obtain connection of water and sewerage 11 5 days no charge Agency: Unitary enterprise "Minskvodokanal" Request and receive inspection by the Acceptance Committee and signature of acceptance act The Acceptance Commission represents the contractor and building owner, as well as the State Fire Department Authority. Upon agreement of these parties, officials of other state agencies can be included in this committee. According to the law the occupancy certificate must be issued within 15 days, but in practice it takes 3 weeks (depending on 12 size of construction and the presence or absence of defects). 21 days BYR 5,657,853 The Acceptance Commission may come and inspect in one day if BuildCo organizes it in such way. At this point the Builder has to pay the remaining 50% of the fee for the construction permit. Agency: Acceptance Commission Doing Business 2015 Belarus 33 Time to No. Procedure Cost to complete complete Request and obtain an inventory inspection and technical passport New buildings cannot be registered without first receiving an inspection from a technical inventory specialist who completes a technical passport. There are approximately 120 technical inventory specialists in the city of Minsk. Previously, the supply of inspectors was too low for the large volume of constructions taking place. However, with the slowdown of the construction sector, technical inventory specialists are more available to complete inspections and register new buildings. 13 21 days BYR 5,202,400 The maximum term of technical inspection prior to the registration of a new building was reduced up to 15 working days (21 calendar days) according to the Decision of the Committee on Land Resources, Geodesy and Cartography #39 dated July 28, 2004 amended as of February 25, 2010 (Art. 12). Agency: Minsk City Agency Register the building with the State Registration and Land Cadastre To register the building upon completing construction, BuildCo must apply to the Registrar's Office. The Registrar authenticates the documents and issues a decision. Resolution No. 1578 of November 21, 2007 sets a maximum time limit of 7 working days for buildings that already have a technical passport and 30 days for buildings that do not. 14 2 days BYR 975,000 State registration of a title over constructed buildings is a separate administrative procedure from the state registration of the new building. BuildCo can apply for it whether simultaneously with registration of building or after the building has been properly registered. In practice, it is common to bring an application for both building registration and registration of a title over it. Agency: State Registration and Land Cadastre * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Belarus 34 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity a customer is always to gain access by obtaining a connection (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to complete them. These Obtaining external installation works and procedures include applications and contracts with possibly purchasing material for these works electricity utilities, clearances from other agencies Concluding any necessary supply contract and and the external and final connection works. The obtaining final supply ranking of economies on the ease of getting electricity is determined by sorting their distance to Time required to complete each procedure frontier scores for getting electricity. These scores are (calendar days) the simple average of the distance to frontier scores Is at least 1 calendar day for each of the component indicators. To make the data comparable across economies, several Each procedure starts on a separate day assumptions are used. Does not include time spent gathering The warehouse: information  Is owned by a local entrepreneur, located Reflects the time spent in practice, with little in the economy’s largest business city, in follow-up and no prior contact with officials an area where other warehouses are Cost required to complete each procedure located. For the 11 economies with a (% of income per capita) population of more than 100 million, data Official costs only, no bribes for a second city have been added. Excludes value added tax  Is not in a special economic zone where the connection would be eligible for subsidization or faster service.  Is to either the low-voltage or the medium- voltage distribution network and either  Is located in an area with no physical overhead or underground, whichever is more constraints (ie. property not near a railway). common in the area where the warehouse is  Is a new construction being connected to located. Included only negligible length in the electricity for the first time. customer’s private domain.  Is 2 stories, both above ground, with a total  Requires crossing of a 10-meter road but all surface of about 1,300.6 square meters the works are carried out in a public land, so (14,000 square feet), is built on a plot of there is no crossing into other people's 929 square meters (10,000 square feet), is private property. used for storage of refrigerated goods  Involves installing one electricity meter. The The electricity connection: monthly electricity consumption will be 26880 kilowatt hour (kWh). The internal  Is 150 meters long and is a 3-phase, 4-wire electrical wiring has been completed. Y, 140-kilovolt-ampere (kVA) (subscribed capacity) connection. Doing Business 2015 Belarus 35 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection Most indicator sets refer to a case scenario in the largest in Belarus? According to data collected by Doing business city of an economy, except for 11 economies for Business, getting electricity there requires 7.0 procedures, which the data are a population-weighted average of the takes 131.0 days and costs 364.1% of income per capita 2 largest business cities. See the chapter on distance to (figure 4.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 4.1 What it takes to obtain an electricity connection in Belarus - Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Belarus 36 GETTING ELECTRICITY Globally, Belarus stands at 148 in the ranking of 189 average ranking provide another perspective in assessing economies on the ease of getting electricity (figure 4.2). how easy it is for an entrepreneur in Belarus to connect a The rankings for comparator economies and the regional warehouse to electricity. Figure 4.2 How Belarus and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2015 Belarus 37 GETTING ELECTRICITY Obtaining an electricity connection is essential to enable ensure safety in the connection process while keeping a business to conduct its most basic operations. In many connection costs reasonable, governments around the economies the connection process is complicated by the world have worked to consolidate requirements for multiple laws and regulations involved—covering service obtaining an electricity connection. What reforms in quality, general safety, technical standards, procurement getting electricity has Doing Business recorded in Belarus practices and internal wiring installations. In an effort to (table 4.1)? Table 4.1 How has Belarus made getting electricity easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Belarus made getting electricity easier by speeding up the process of issuing technical specifications and excavation DB2014 permits and by reducing the time needed to connect to the electricity network. Source: Doing Business database. Doing Business 2015 Belarus 38 GETTING ELECTRICITY What are the details? The indicators reported here for Belarus are based on a OBTAINING AN ELECTRICITY CONNECTION set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility— Name of utility: Minskenergo identified by Doing Business. Data are collected from the distribution utility, then completed and verified by City: Minsk electricity regulatory agencies and independent professionals such as electrical engineers, electrical The procedures are those that apply to a warehouse and contractors and construction companies. The electricity electricity connection matching the standard distribution utility surveyed is the one serving the area assumptions used by Doing Business in collecting the (or areas) in which warehouses are located. If there is a data (see the section in this chapter on what the choice of distribution utilities, the one serving the largest indicators cover). The procedures, along with the number of customers is selected. associated time and cost, are summarized below. Table 4.2 Summary of time, cost and procedures for getting electricity in Belarus - Time to No. Procedure Cost to complete complete Apply to Minsk Cable Grid Company for an electricity connection and await issuance of technical conditions The customer has to submit construction permits obtained from the Committee on Architecture and Construction of the Minsk City Committee, an estimate of the required load and a plan of the location of the warehouse. The application for technical conditions is picked up at the Committee on Architecture and Construction of the Minsk City Committee. 7 calendar days BYR 0 1 The technical conditions concern only the external connection. In general they may include instructions for construction of a new substation; lining of high-voltage and low-voltage cables; in a case of reconstruction works - participation of the customer in the works. Agency: Minsk Cable Grid Company Await preparation of the external connection design by a private design company and receive its approval The customer hires a licensed project design organization for the preparation of the electrical design of the external connection. The 2 project design organization prepares and obtains all the necessary 60 calendar days BYR 28,800,000 approvals from a number of government organizations. Agency: Project design institute Doing Business 2015 Belarus 39 Time to No. Procedure Cost to complete complete Obtain excavation permit at the Technical Department of the Minsk City Executive Committee The excavation permit is obtained by the subcontractor at the Technical 3 Department of the Minsk City Executive Committee. 7 calendar days BYR 592,000 Agency: Technical Department of the Minsk City Executive Committee Await completion of the external connection works by an electrical subcontractor The external connection works are carried out by an electrical contractor. The substation can be assembled on the location or can be bought already assembled. 30 calendar days BYR 205,700,000 4 The meter is installed by the hired company after the works are completed. Agency: Electrical Subcontractor Minsk Grid Company inspects the completed external connection works and issues an act specifying the ownership of the installed equipment and responsibility for servicing the connection Minsk Grid Company visits the site to inspect the finished external part 5 of the connection and issues an act specifying the division of 7 calendar days BYR 0 responsibilities for maintenance of the line. Agency: Minsk Cable Grid Company Await and obtain inspection from Energonadzor (Energy State Inspectorate) and receive an operation permit The customer has to submit a range of technical documents to the State Energy Inspectorate (Energonadzor). Then Energonadzor visits the site to inspect both the external and the internal works and issues an operation permit. 6 The documents that need to submitted: 10 calendar days BYR 0 1.1. application form; 1.2. certificate of state registration; 1.3. data sheet of the building, structure, premises, etc .; 1.4. technical conditions for the power supply of the facility; 1.5. project design documentation with approvals by Energonadzor and the supply company; 1.7. set of acceptance documentation regarding external electrical installation upon completion of the external works in accordance with Doing Business 2015 Belarus 40 Time to No. Procedure Cost to complete complete the project design documentation; 1.8. executive drawing of the cable layout (if necessary); 1.9. documentation for the installation and commissioning work, including acts of testing the installation in all operating modes according to the technical specifications and project design documentation; 1.10. passports and certificates for the materials used, building construction, equipment. After providing the above documentation and in the absence of any remarks, Energonadzor issues a certificate of compliance of project documentation with the requirements of operational reliability and safety. In addition to the documentation required to obtain the final act (заключение), the following must be submitted to Energonadzor: 1. the act specifying the ownership of the installed equipment and responsibility for servicing the connection (акт разграничения балансовой принадлежности.); 2. statement of the technical documentation on electrical installations; 3. certificate of organization of operation of electrical installations; 4. certificate confirming that either trained and authorized service personnel or a servicing contract for electrical installations is available; 5. extracts from the journals of examination of persons responsible for the general condition of electrical equipment; 6. extracts from the orders on appointment of persons responsible for the general condition of electrical facilities. Agency: Energonadzor (State Energy Inspectorate) Request the final connection from the supply department (Energosbyt), conclude a supply contract, check the meter and await the final connection The customer submits to the supply department (Energosbyt) a list of technical documents. Then a specialist from Energosbyt visits the site to check the meter. The same specialist prepares a supply contract the next day. After checking the meter Energosbyt forwards the permission to 10 calendar days BYR 317,004 7 Minsk Cable Grid Company to activate the connection and Minsk Cable Grid Company turns on the power. The connection fee is based on the minimum wage. Agency: Energosupply/Minsk Cable Grid Company * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2015 Belarus 41 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city 2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. The (calendar days) ranking of economies on the ease of registering Does not include time spent gathering property is determined by sorting their distance to information frontier scores for registering property. These scores are the simple average of the distance to frontier Each procedure starts on a separate day. scores for each of the component indicators. To Procedures that can be fully completed online are recorded as ½ day. make the data comparable across economies, several assumptions about the parties to the Procedure considered completed once final transaction, the property and the procedures are document is received used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure  Are limited liability companies, 100% (% of property value) domestically and privately owned and Official costs only, no bribes perform general commercial activities. No value added or capital gains taxes included  Are located in the economy’s largest business city . 2  Is located in a periurban commercial zone, and no rezoning is required.  Have 50 employees each, all of whom are nationals.  Has no mortgages attached, has been under the same ownership for the past 10 years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square  Has a value of 50 times income per capita. feet) of land and a 10-year-old, 2-story The sale price equals the value. warehouse of 929 square meters (10,000  Is registered in the land registry or cada- square feet). The warehouse is in good stre, or both, and is free of title disputes. condition and complies with all safety standards, building codes and legal  Property will be transferred in its entirety. requirements. There is no heating system. 2 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 Belarus 42 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in which the data are a population-weighted average of the Belarus? According to data collected by Doing Business, 2 largest business cities. See the chapter on distance to registering property there requires 2.0 procedures, takes frontier and ease of doing business ranking at the end of 4.0 days and costs 0.0% of the property value (figure 5.1). this profile for more details. Most indicator sets refer to a case scenario in the largest business city of an economy, except for 11 economies for Figure 5.1 What it takes to register property in Belarus - Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Belarus 43 REGISTERING PROPERTY Globally, Belarus stands at 3 in the ranking of 189 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Belarus to transfer property. Figure 5.2 How Belarus and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2015 Belarus 44 REGISTERING PROPERTY Economies worldwide have been making it easier for the time required substantially—enabling buyers to use entrepreneurs to register and transfer property—such as or mortgage their property earlier. What property by computerizing land registries, introducing time limits registration reforms has Doing Business recorded in for procedures and setting low fixed fees. Many have cut Belarus (table 5.1)? Table 5.1 How has Belarus made registering property easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Belarus continued to improve the property registration process by increasing efficiency at the land registry in Minsk, which DB2010 reduced the time required to verify ownership, and by eliminating the requirement to have incorporation documents notarized during property transfers. Belarus simplified property transfer by doing away with the DB2012 requirement to obtain the municipality’s approval for transfers of most commercial buildings in Minsk. Belarus made transferring property easier by introducing a DB2014 fast-track procedure for property registration. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Belarus 45 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property lawyers, Property value: BYR 3,233,059,084 notaries and property registries. These procedures are those that apply to a transaction matching the City: Minsk standard assumptions used by Doing Business in collecting the data (see the section in this chapter on The procedures, along with the associated time and what the indicators cover). cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in Belarus Time to No. Procedure Cost to complete complete Obtain the non-encumbrance certificate "Under the legislation of the Republic of Belarus in the described situation obtaining a non-encumbrance certificate is not mandatory for the registration of a sale-purchase agreement and registration of transfer of title. There is possibility to obtain informaion on rights and encumbrances over the immovable property online but it is allowed only for persons having an agreement with the National Cadastre Agency for paid access to online version of the Unified State Register of Real Estate, Rights Thereto and Transactions Therewith (http://gzk.nca.by/). The fee for access is BYR 350,000 per month. 3 working days, 1 However, obtaining paper certificate is recommended, since the but in practice 1 BYR 75,000 information printed out from the online register is not the official day document, which cannot be provided to third parties, e.g. as an evidence to the court. Resolution of the Council of Ministers of the Republic of Belarus No.156 of February 17, 2012 ""On Approval of the Unified List of Administrative Procedures Performed by State Authorities and Other Organizations in Relation to Legal Entities and Individual Entrepreneurs and Amending the Resolution of the Council of Ministers No. 193 of February 14, 2009 and Cancellation of Some Resolutions of the Council of Ministers"" sets up three day time limit for issuance of non-encumbrance certificate. However, in practice , it is possible to obtain the non-encumbrance certificate in one day. Doing Business 2015 Belarus 46 Time to No. Procedure Cost to complete complete The cost for obtaining a non-encumbrance certificate is 0,5 of the base amount what is BYR 75,000 since April 1, 2014 (determined by Resolution of the Council of Ministers No. 255 of March 25, 2014 “On establishing the size of base amount”)." Agency: Local Agency on State Registration and Land Cadastre (hereinafter - the Local Registry) The buyer applies to the Registry for the registration of a sale- "For regular purchase agreement and property title procedure - 7 business days (9- "The Resolution No. 156 on February 17, 2012 describes the procedure 11 calendar days) • for the state registration of the sale-purchase agreement. 3 base amounts for the state registration of a The list of documents that should be submitted to the Local agency on state registration and land Cadastre for registration procedures include: sale purchase agreement;• 1. Application in the established form. Application is prepared by the 0,2 base amount Registration Clerk after verification of all submitted documents. for state Completed application is signed by the authorized representatives of registration of both parties. property title to the warehouse; • 2. Certificate of the state registration of the buyer. 0,2 base amount Regular for state 3. Passport or other identification documents for authorized procedure - 7 registration of representative. If the representatives are the heads of the buying and business days (9- transfer of the title selling companies, the employment contracts between them and their 11 calendar days), to the land plot respective companies should be submitted, to confirm legal powers. If expedited 2 which has no the representative is acting as a proxy, his power of attorney should be procedure - 2 encumbrances, submitted. business days (2- and 0,6 base 4. Sale-purchase agreement signed by the Seller and the Buyer three 4 calendar days) amount for state copies. registration of transfer of the title 5. Deed of assignment or another document, signed by the parties to to the land plot confirm that transfer of a property from seller to buyer. which has encumbrances.• 6. Document, confirming registration fee payment to the Registry. 0,5 base amount for preparation and issuance of Registration fees are estimated as follow: the land cadastral - 3 bases (BYR 300,000) for the registration of sale-purchase agreement, plan of the land plot;• 1 base - 0.2 bases (BYR 20,000) for each additional subject of state registration, amount for such as the registration of the transfer of the title on the warehouse and issuance to the registration of the transfer of the title on the land plot, buyer of the certificate - 1.5 bases (BYR 150,000) for expedited procedure (irrespective of the confirming title to Doing Business 2015 Belarus 47 Time to No. Procedure Cost to complete complete number of subjects for the state registration). the land plot.For expedited procedure - 2 Duration of the procedure shall not exceed specified by the law time business days (2-4 limits: 7 business days (regular procedure) or 2 business days (expedited calendar days):• procedure). 3 base amounts Within specified timeframe, the authorized representative will obtain (at for the state the local agency's of state registration and land Cadastre office) registration of a following documents: sale purchase agreement;• 0,2 base amount 1. Sale-purchase agreement with the note of the local agency of state for state registration and land Cadastre in two copies (one for seller and one for registration of buyer) property title to the warehouse; • 2. Certificate confirming transfer of a title for warehouse to buyer 0,2 base amount for state 3. Certificate confirming transfer of a title for land plot to buyer." registration of transfer of the title to the land plot Agency: Minsk City Agency on state regisreation and land cadastre which has no encumbrances, and 0,6 base amount for state registration of transfer of the title to the land plot which has encumbrances.• 0,5 base amount for preparation and issuance of the land cadastral plan of the land plot;• 1 base amount for issuance to the buyer of the certificate confirming title to the land plot• 1.5 base amount as additional fee for the expedited procedure. * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Doing Business 2015 Belarus 48 Source: Doing Business database. Doing Business 2015 Belarus 49 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable Strength of legal rights index (0–12) 3 lenders’ rights to view a potential borrower’s financial history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially Depth of credit information index (0–8) 4 movable property, as security to generate capital— while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting Notes section of the Doing Business 2015 report). credit is determined by sorting their distance to These scenarios assume that the borrower: frontier scores for getting credit. These scores are the distance to frontier score for the strength of legal  Is a private limited liability company. rights index and the depth of credit information  Has its headquarters and only base of index. operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. 3 For the legal rights index, 2 new points are added in Doing Business 2015 for new data collected to assess the overall legal framework for secured transactions and the functioning of the collateral registry. 4 For the credit information index, 2 new points are added in Doing Business 2015 for new data collected on accessing borrowers’ credit information online and availability of credit scores. Doing Business 2015 Belarus 50 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, Belarus stands at 104 in the ranking of 189 and bankruptcy laws in Belarus facilitate access to credit? economies on the ease of getting credit (figure 6.1). The The economy has a score of 6 on the depth of credit rankings for comparator economies and the regional information index and a score of 2 on the strength of average ranking provide other useful information for legal rights index (see the summary of scoring at the end assessing how well regulations and institutions in Belarus of this chapter for details). Higher scores indicate more support lending and borrowing. credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Belarus and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2015 Belarus 51 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for Belarus and shows the scores for indicators into context is to see where the economy comparator economies as well as the regional average stands in the distribution of scores across economies. score. Figure 6.3 shows the same for the depth of credit Figure 6.2 highlights the score on the strength of legal information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Source: Doing Business database. Doing Business 2015 Belarus 52 GETTING CREDIT When economies strengthen the legal rights of lenders information, they can increase entrepreneurs’ access to and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded increase the scope, coverage and accessibility of credit in Belarus (table 6.1)? Table 6.1 How has Belarus made getting credit easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Belarus enhanced access to credit by facilitating the use of the DB2011 pledge as a security arrangement and providing for out-of- court enforcement of the pledge on default. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Belarus 53 GETTING CREDIT What are the details? The getting credit indicators reported here for Belarus The data on the legal rights of borrowers and lenders are are based on detailed information collected in that gathered through a survey of financial lawyers and economy. The data on credit information sharing are verified through analysis of laws and regulations as well collected through a survey of a credit registry and/or as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, a credit information index, a score of 1 is assigned for each score of 1 is assigned for each of 10 aspects related to of 8 features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. Strength of legal rights index (0–12) Index score: 2 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents to security interests in movable No assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of No movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of Yes its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically No to the products, proceeds or replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement No include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an electronic database indexed by debtor's No name? Does a notice-based collateral registry exist in which all functional equivalents can be No registered? Does a modern collateral registry exist in which registrations, amendments, cancellations and No searches can be performed online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor No defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is No liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law protect secured creditors’ rights by No providing clear grounds for relief from the stay and/or sets a time limit for it? Doing Business 2015 Belarus 54 Strength of legal rights index (0–12) Index score: 2 Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell the collateral through Yes public auction and private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Depth of credit information index (0–8) Credit bureau Credit registry Index score: 6 Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative credit data distributed? No Yes 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - No No 0 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on No Yes 1 defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per No Yes 1 capita distributed? By law, do borrowers have the right to access their No Yes 1 data in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an No Yes 1 online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions No No 0 assess the creditworthiness of borrowers? Note: Prior to Doing Business 2015, the depth of credit information index covered only the first 6 features listed above. An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 0 40,834 Number of individuals 0 4,287,204 Percent of total 0.0 64.5 Doing Business 2015 Belarus 55 Source: Doing Business database. Doing Business 2015 Belarus 56 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions ; Disclosure requirements for related-party transactions What do the indicators cover? Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold interested indicators and shareholders’ rights in corporate directors liable for prejudicial related-party transactions; governance through another. The ranking of economies Available legal remedies (damages, disgorgement of on the strength of minority investor protections is profits, fines, imprisonment, rescission of the transaction) determined by sorting their distance to frontier scores Ease of shareholder suits index (0–10) for protecting minority investors. These scores are the Access to internal corporate documents; Evidence simple average of the distance to frontier scores for the obtainable during trial and allocation of legal expenses extent of conflict of interest regulation index and the extent of shareholder governance index. To make the Extent of conflict of interest regulation index data comparable across economies, a case study uses (0–10) several assumptions about the business and the Sum of the extent of disclosure, extent of director liability transaction. and ease of shareholder indices, divided by 3 The business (Buyer): Extent of shareholder rights index (0-10.5)  Is a publicly traded corporation listed on the Shareholders’ rights and role in major corporate decisions economy’s most important stock exchange (or at least a large private company with Strength of governance structure index (0- multiple shareholders). 10.5) Governance safeguards protecting shareholders from  Has a board of directors and a chief executive undue board control and entrenchment officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Extent of corporate transparency index (0-9) specifically required by law. Corporate transparency on ownership stakes, The transaction involves the following details: compensation, audits and financial prospects  Mr. James, a director and the majority Extent of shareholder governance index shareholder of the company, proposes that (0–10) the company purchase used trucks from Sum of the extent of shareholders rights, strength of another company he owns. governance structure and extent of corporate transparency indices, divided by 3  The price is higher than the going price for used trucks, but the transaction goes forward. Strength of investor protection index (0–10)  All required approvals are obtained, and all Simple average of the extent of conflict of interest required disclosures made, though the regulation and extent of shareholder governance indices transaction is prejudicial to Buyer.  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2015 Belarus 57 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in Belarus? The economy has a score of 5.2 not measure all aspects related to the protection of on the strength of minority investor protection index, minority investors, a higher ranking does indicate that an with a higher score indicating stronger protections. economy’s regulations offer stronger minority investor protections against self-dealing in the areas measured. Globally, Belarus stands at 94 in the ranking of 189 economies on the strength of minority investor Figure 7.1 How Belarus and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2015 Belarus 58 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the protecting indices for Belarus in 2014. A summary of scoring for the minority investors indicators into context is to see where protecting minority investors indicators at the end of this the economy stands in the distribution of scores across chapter provides details on how the indices were comparator economies. Figures 7.2 through 7.7 highlight calculated. the scores on the various minority investor protection Figure 7.2 How extensive are disclosure Figure 7.3 How extensive is the liability regime for directors? requirements? Extent of director liability index (0-10) Extent of disclosure index (0-10) Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2015 Belarus 59 PROTECTING MINORITY INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Ease of shareholder suits index (0-10) Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2015 Belarus 60 PROTECTING MINORITY INVESTORS Figure 7.5 How extensive are shareholder rights? Extent of shareholder rights index (0-10.5) Note: The higher the score, the stronger the protections. Source: Doing Business database. Figure 7.6 How strong is the governance structure? Strength of governance structure index (0-10.5) Note: Higher scores indicate more stringent governance structure requirements. Source: Doing Business database. Doing Business 2015 Belarus 61 Figure 7.7 How extensive is corporate transparency? Extent of corporate transparency index (0-9) Note: Higher scores indicate greater transparency. Source: Doing Business database. Doing Business 2015 Belarus 62 PROTECTING MINORITY INVESTORS Economies with the strongest protections of minority result, reforms to strengthen minority investor investors from self-dealing require detailed disclosure protections may move ahead on different fronts—such and define clear duties for directors. They also have well- as through new or amended company laws, securities functioning courts and up-to-date procedural rules that regulations or civil procedure rules. What minority give minority shareholders the means to prove their case investor protection reforms has Doing Business recorded and obtain a judgment within a reasonable time. As a in Belarus (table 7.1)? Table 7.1 How has Belarus strengthened minority investor protections—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Belarus strengthened investor protections by introducing DB2012 requirements for greater corporate disclosure to the board of directors and to the public. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Belarus 63 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported to disclosure, director liability, shareholder suits, here for Belarus are based on detailed information shareholder rights, governance structure and corporate collected through a survey of corporate and securities transparency in a standard case study (for more details, lawyers about securities regulations, company laws and see the Data Notes section of the Doing Business 2015 court rules of evidence and procedure. To construct the report). The summary below shows the details underlying six indicators on minority investor protection, scores are the scores for Belarus. assigned to each based on a range of conditions relating Table 7.2 Summary of scoring for the protecting minority investors indicators in Belarus Answer Score Extent of disclosure index (0-10) 7.0 Which corporate body can provide legally sufficient Shareholders excluding interested 3 approval for the Buyer-Seller transaction? (0-3) parties Is disclosure by the interested director to the board of Full disclosure of all material facts 2 directors required? (0-2) Is disclosure of the transaction in published periodic filings Disclosure on the transaction only 1 (annual reports) required? (0-2) Is immediate disclosure of the transaction to the public Disclosure on the transaction only 1 and/or shareholders required? (0-2) Must an external body review the terms of the transaction No 0 before it takes place? (0-1) Extent of director liability index (0-10) 0.0 Can shareholders sue directly or derivatively for the damage caused by the Buyer-Seller transaction to the company? (0- No 0 1) Can shareholders hold the interested director liable for the Not liable 0 damage caused by the transaction to the company? (0-2) Can shareholders hold members of the approving body liable for the damage cause by the transaction to the Not liable 0 company? (0-2) Must the interested director pay damages for the harm caused to the company upon a successful claim by a No 0 shareholder plaintiff? (0-1) Must the interested director repay profits made from the transaction upon a successful claim by a shareholder No 0 plaintiff? (0-1) Can both fines and imprisonment be applied against the No 0 interested indrector? (0-1) Can a court void the transaction upon a successful claim by Only in case of fraud or bad faith 0 a shareholder plaintiff? (0-2) Ease of shareholder suits index (0-10) 8.0 Before filing suit, can shareholders owning 10% of the company’s share capital inspect the transaction documents? Yes 1 (0-1) Can the plaintiff obtain any documents from the defendant No 3 Doing Business 2015 Belarus 64 and witnesses during trial? (0-3) Can the plaintiff request categories of documents from the No 0 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and Yes 2 witnesses during trial? (0-2) Is the level of proof required for civil suits lower than that of Yes 1 criminal cases? (0-1) Can shareholder plaintiffs recover their legal expenses from Yes if successful 1 the company? (0-2) Strength of minority investor protection index (0-10) 5.2 Extent of conflict of interest regulation index (0-10) 5.0 Extent of shareholder rights index (0-10.5) 5.5 Can shareholders amend company bylaws or statutes with a No 0 simple majority? Can shareholders owning 10% of the company's share Yes 1.5 capital call for an extraordinary meeting of shareholders? Can shareholders remove members of the board of Yes 1.5 directors before the end of their term. Must a company obtain its shareholders’ approval every Yes 1.5 time it issues new shares? Are shareholders automatically granted subscription rights No 0 on new shares? Must shareholders approve the election and dismissal of the No 0 external auditor? Can shareholders freely trade shares prior to a major Yes for listed companies 1 corporate action or meeting of shareholders? Strength of governance structure index (0-10.5) 7.0 Is the CEO barred from also serving as chair of the board of No 0 directors? Must the board of directors include independent board Yes 1.5 members? Must a company have a separate audit committee? Yes 1.5 Must changes to the voting rights of a series or class of shares be approved only by the holders of the affected No 0 shares? Must a potential acquirer make a tender offer to all Yes for listed companies 1 shareholders upon acquiring 50% of a company? Is cross-shareholding between 2 independent companies No 0 limited to 10% of outstanding shares? Is a subsidiary barred from acquiring shares issued by its No 0 parent company? Extent of corporate transparency index (0-9) 3.5 Must ownership stakes representing 10% be disclosed? No 0 Must information about board members’ other directorships as well as basic information on their primary employment No 0 be disclosed? Must the compensation of individual managers be No 0 disclosed? Must financial statements contain explanatory notes on significant accounting policies, trends, risks, uncertainties Yes for listed companies 1 and other factors influencing the reporting? Must annual financial statements be audited by an external Yes 1.5 Doing Business 2015 Belarus 65 auditor? Must audit reports be disclosed to the public? Yes for listed companies 1 Extent of shareholder governance index (0-10) 5.3 Source: Doing Business database. PAYING TAXES Taxes are essential. The level of tax rates needs to be carefully chosen—and needless complexity in tax WHAT THE PAYING TAXES INDICATORS rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2013 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, sales tax or goods and service tax) Using a case scenario, Doing Business measures the taxes and mandatory contributions that a medium- Method and frequency of filing and payment size company must pay in a given year as well as the Time required to comply with 3 major taxes administrative burden of paying taxes and (hours per year) contributions. This case scenario uses a set of financial statements and assumptions about Collecting information and computing the tax payable transactions made over the year. Information is also compiled on the frequency of filing and payments as Completing tax return forms, filing with well as time taken to comply with tax laws. The proper agencies ranking of economies on the ease of paying taxes is Arranging payment or withholding determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are Preparing separate tax accounting books, if required the simple average of the distance to frontier scores for each of the component indicators, with a Total tax rate (% of profit before all taxes) threshold and a nonlinear transformation applied to Profit or corporate income tax one of the component indicators, the total tax rate . 5 The financial statement variables have been updated Social contributions and labor taxes paid by to be proportional to 2012 income per capita; the employer previously they were proportional to 2005 income Property and property transfer taxes per capita. To make the data comparable across Dividend, capital gains and financial economies, several assumptions are used. transactions taxes  TaxpayerCo is a medium-size business that Waste collection, vehicle, road and other taxes started operations on January 1, 2012.  Taxes and mandatory contributions include  The business starts from the same financial corporate income tax, turnover tax and all position in each economy. All the taxes labor taxes and contributions paidof by the 5 The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power 0.8. The threshold is defined as and mandatory the total contributions tax rate at the 15th percentilepaid during of the company. overall distribution for all years included in the analysis. It is calculated and adjusted on a the yearly basis. second The thresholdyear of is not operation based are recorded. on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set  range Alower at the end ofstandard of deductions the distribution and of tax rates levied on medium-size  Taxes and mandatory contributions are exemptions enterprises in the manufacturing sector as observed through the paying taxes indicators. are also This reduces recorded. the bias in the indicators toward economies that do not need to levyat measured all levels significant government. ofon taxes companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year’s threshold is 26.1%. Doing Business 2015 Belarus 66 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with 2 largest business cities. See the chapter on distance to taxes in Belarus—and how much do firms pay in taxes? frontier and ease of doing business ranking at the end of On average, firms make 7.0 tax payments a year, spend this profile for more details. 183.0 hours a year filing, preparing and paying taxes and Globally, Belarus stands at 60 in the ranking of 189 pay total taxes amounting to 52.0% of profit (see the economies on the ease of paying taxes (figure 8.1). The summary at the end of this chapter for details). Most rankings for comparator economies and the regional indicator sets refer to a case scenario in the largest average ranking provide other useful information for business city of an economy, except for 11 economies for assessing the tax compliance burden for businesses in which the data are a population-weighted average of the Belarus. Figure 8.1 How Belarus and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2015 Belarus 67 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue rise. consolidating filings, reducing the frequency of What tax reforms has Doing Business recorded in Belarus payments or offering electronic filing and payment. (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has Belarus made paying taxes easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Belarus made paying taxes easier and less costly for companies by encouraging the use of electronic systems, reducing the DB2010 number of payments for the property tax, adjusting the ecological tax rates and lowering turnover tax rates. Reductions in the turnover tax, social security contributions and the base for property taxes along with continued efforts to DB2011 encourage electronic filing made it easier and less costly for companies in Belarus to pay taxes. Belarus abolished several taxes, including turnover and sales taxes, and simplified compliance with corporate income, value DB2012 added and other taxes by reducing the frequency of filings and payments and facilitating electronic filing and payment. Belarus made paying taxes easier and less costly for companies DB2013 by reducing the profit tax rate and encouraging the use of electronic filing and payment systems. Belarus made paying taxes easier for companies by introducing an electronic system for filing and paying contributions for the obligatory insurance for work accidents—and by simplifying the DB2015 filing requirements for corporate income tax and VAT. On the other hand, it increased the ecological tax rate and made bad debt provisions nondeductible for purposes of the corporate income tax. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Belarus 68 PAYING TAXES What are the details? The indicators reported here for Belarus are based on LOCATION OF STANDARDIZED COMPANY the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the section in this City: Minsk chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of assumptions and transactions that the company The taxes and contributions paid are listed in the completed during its 2nd year of operation. summary below, along with the associated number of Respondents are asked how much taxes and payments, time and tax rate. mandatory contributions the business must pay and how these taxes are filed and paid. Table 8.2 Summary of tax rates and administration Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate gross Social security contributions 1 online filing 59 34% 38.4 salaries taxable Corporate Income Tax 1 online filing 83 18% 11.9 profit residual value of Immovable Property Tax 1 online filing 0 1% 1 immovabl e property Obligatory insurance for work gross 1 online filing 0 0.6% 0.7 accidents salaries cadastral value of land plot Land tax 1 online filing 0 varies 0 estimated by authorities mining, oil refining, blowouts Ecological tax 1 online filing 0 varies 0 to the environme nt, etc. Doing Business 2015 Belarus 69 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate value not Value Added Tax (VAT) 1 online filing 41 20% 0 added included Employee paid - Social gross 0 paid jointly 0 1% 0 withheld security contributions salaries Totals 7.0 183.0 52.0 Source: Doing Business database. Doing Business 2015 Belarus 70 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from a Customs clearance documents 10% drop in their trading costs than from a similar reduction in the tariffs applied to their products in Port and terminal handling documents global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing a Inland transport and handling standard shipment of goods by sea transport, and the number of documents necessary to complete the Customs clearance and inspections transaction. The indicators cover predefined stages Port and terminal handling such as documentation requirements and procedures Does not include sea transport time at customs and other regulatory agencies as well as at the port. They also cover trade logistics, including Cost required to export and import (US$ per the time and cost of inland transport to the largest container) business city. The ranking of economies on the ease All documentation of trading across borders is determined by sorting their distance to frontier scores for trading across Inland transport and handling borders. These scores are the simple average of the Customs clearance and inspections distance to frontier scores for each of the component Port and terminal handling indicators. To make the data comparable across economies, Doing Business uses several assumptions Official costs only, no bribes about the business and the traded goods. The business:  Is located in the economy’s largest The traded product: business city. For the 11 economies with a population of more than 100 million, data  Is not hazardous nor includes military items. for a second city have been added.  Does not require refrigeration or any other  Is a private, limited liability company, special environment. domestically owned and does not operate  Do not require any special phytosanitary or with special export or import privileges. environmental safety standards other than  Conducts export and import activities, but accepted international standards. does not have any special accreditation  Is one of the economy’s leading export or such as an authorized economic operator import products. status.  Is transported in a dry-cargo, 20-foot full container load. Doing Business 2015 Belarus 71 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Belarus? population-weighted average of the 2 largest business According to data collected by Doing Business, exporting cities. See the chapter on distance to frontier and ease of a standard container of goods requires 8 documents, doing business ranking at the end of this profile for more takes 15.0 days and costs $1460.0. Importing the same details. container of goods requires 10 documents, takes 30.0 Globally, Belarus stands at 145 in the ranking of 189 days and costs $2265.0 (see the summary of four economies on the ease of trading across borders (figure predefined stages and documents at the end of this 9.1). The rankings for comparator economies and the chapter for details). Most indicator sets refer to a case regional average ranking provide other useful scenario in the largest business city of an economy, information for assessing how easy it is for a business in except for 11 economies for which the data are a Belarus to export and import goods. Figure 9.1 How Belarus and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2015 Belarus 72 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing Business tools to facilitate trade—including single windows, risk- recorded in Belarus (table 9.1)? based inspections and electronic data interchange Table 9.1 How has Belarus made trading across borders easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Belarus reduced the transit time for trade by implementing a DB2010 risk-based inspection system and improving operations at the border crossing. Belarus reduced the time to trade by introducing electronic DB2011 declaration of exports and imports. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Belarus 73 TRADING ACROSS BORDERS What are the details? The indicators reported here for Belarus are based on LOCATION OF STANDARDIZED COMPANY a set of specific predefined stages for trading a standard shipment of goods by ocean transport (see the section in this chapter on what the indicators Port Name: Klaipeda, Lithuania cover). Information on the required documents and the time and cost to complete export and import is City: Minsk collected from local freight forwarders, shipping lines, The predefined stages, and the associated time and cost, customs brokers, port officials and banks. for exporting and importing a standard shipment of goods are listed in the summary below, along with the required documents. Table 9.2 Summary of predefined stages and documents for trading across borders in Belarus Stages to export Time (days) Cost (US$) Customs clearance and inspections 1 160 Documents preparation 8 110 Inland transportation and handling 4 1,000 Ports and terminal handling 2 190 Totals 15 1,460 Stages to import Time (days) Cost (US$) Customs clearance and inspections 1 200 Documents preparation 22 515 Inland transportation and handling 5 1,350 Ports and terminal handling 2 200 Totals 30 2,265 Doing Business 2015 Belarus 74 Documents to export Bill of lading Commercial invoice Contract registered by bank Convention des Marchandises Routiers - CMR (Transport document) Customs export declaration Declaration of origin (Statement of manufacturer (zayavlenie)/ Certificate of Origin Packing list Transit document (T1) Documents to import Bill of lading Cargo release order Certificate of conformity/ Technical standard certificate Commercial invoice Contract registered by bank Convention des Marchandises Routiers -- CMR (Transport document) Customs import declaration Document confirming payment of customs fees (platejka/ chek) Packing list Transit document (T1) Source: Doing Business database. Doing Business 2015 Belarus 75 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent courts encourage new business relationships because Procedures to enforce a contract through businesses know they can rely on the courts if a new the courts (number) customer fails to pay. Speedy trials are essential for Steps to file and serve the case small enterprises, which may lack the resources to Steps for trial and judgment stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment What do the indicators cover? Time required to complete procedures (calendar days) Doing Business measures the efficiency of the judicial system in resolving a commercial dispute before Time to file and serve the case local courts. Following the step-by-step evolution of Time for trial and obtaining judgment a standardized case study, it collects data relating to Time to enforce the judgment the time, cost and procedural complexity of resolving a commercial lawsuit. The ranking on the ease of Cost required to complete procedures (% of enforcing contracts is the simple average of the claim) percentile rankings on its component indicators: Average attorney fees procedures, time and cost. Court costs The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The Enforcement costs case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The seller and buyer are located in the economy’s largest business city. For the 11 economies with a population of more than  The seller requests a pretrial attachment to 100 million, data for a second city have secure the claim. been added.  The dispute on the quality of the goods  The buyer orders custom-made goods, requires an expert opinion. then fails to pay.  The judge decides in favor of the seller; there  The seller sues the buyer before a is no appeal. competent court.  The seller enforces the judgment through a  The value of the claim is 200% of the public sale of the buyer’s movable assets. income per capita or the equivalent in local currency of USD 5,000, whichever is greater. Doing Business 2015 Belarus 76 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial cities. See the chapter on distance to frontier and ease of dispute through the courts in Belarus? According to data doing business ranking at the end of this profile for more collected by Doing Business, contract enforcement takes details. 275.0 days, costs 23.4% of the value of the claim and Globally, Belarus stands at 7 in the ranking of 189 requires 29.0 procedures (see the summary at the end of economies on the ease of enforcing contracts (figure this chapter for details). Most indicator sets refer to a 10.1). The rankings for comparator economies and the case scenario in the largest business city of an economy, regional average ranking provide other useful except for 11 economies for which the data are a benchmarks for assessing the efficiency of contract population-weighted average of the 2 largest business enforcement in Belarus. Figure 10.1 How Belarus and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2015 Belarus 77 ENFORCING CONTRACTS Economies in all regions have improved contract reducing backlogs by introducing periodic reviews to enforcement in recent years. A judiciary can be improved clear inactive cases from the docket and by making in different ways. Higher-income economies tend to look procedures faster. What reforms making it easier (or for ways to enhance efficiency by introducing new more difficult) to enforce contracts has Doing Business technology. Lower-income economies often work on recorded in Belarus (table 10.1)? Table 10.1 How has Belarus made enforcing contracts easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Belarus modified its code of economic procedure, altering the DB2012 time frames for commercial dispute resolution. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Belarus 78 ENFORCING CONTRACTS What are the details? The indicators reported here for Belarus are based COURT NAME on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this chapter on what Claim value: BYR 108,859,837 the indicators cover). These procedures, and the time and cost of completing them, are identified through Court name: Minsk Economic Court study of the codes of civil procedure and other court regulations, as well as through questionnaires City: Minsk completed by local litigation lawyers (and, in a quarter of the economies covered by Doing Business, by judges as well). Table 10.2 Summary of time, cost and procedures for enforcing a contract in Belarus Europe & Central Indicator Belarus Asia average Time (days) 275 448 Filing and service 50 Trial and judgment 135 Enforcement of judgment 90 Cost (% of claim) 23.4 25.2 Attorney cost (% of claim) 12.0 Court cost (% of claim) 11.4 Enforcement Cost (% of claim) 0.0 Procedures (number) 29 37 Number of procedures (without bonus points) 30 Specialized commercial courts -1 Total number of procedures (including bonus points) 29 Doing Business 2015 Belarus 79 No. Procedures Filing and service: Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 1 contract. Mandatory conciliation or mediation: Plaintiff and Defendant attempt to settle the dispute prior to 2 initiating the lawsuit. Conciliation or mediation is unsuccessful. Attempts at settlement are recorded and the judge is informed of same. Plaintiff files a summons and complaint: Plaintiff files a summons and complaint with the court (orally or * in writing). Plaintiff pays court fees: Plaintiff pays court fees (e.g. court duties, stamp duties, or any other type of court * fees). Answer ‘yes’ even if Plaintiff recovers these costs. Registration of court case: Registration of court case by the court administration (this can include 3 assigning a reference number to the case). Assignment of court case to a judge: Assignment of court case to a judge (through a random procedure, * automated system, ruling of an administrative judge, court officer, etc). Judicial scrutiny of summons and complaint: Judge examines Plaintiff's summons and complaint for 4 formal requirements as a matter of law or standard practice. Judge admits summons and complaint: Judge admits summons and complaint (after verifying the formal * requirements). Delivery of summons and complaint to person authorized to perform service of process on Defendant: 5 The judge or a court officer delivers the summons to a summoning office, officer, or authorized person (including Plaintiff), for service of process on Defendant. Mailing of summons and complaint: Court or process server, including (private) bailiff, mails summons * and complaint to Defendant. Attempt at physical delivery: An attempt to physically deliver summons and complaint to Defendant is 6 made. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. Decision on pre-judgment attachment: Judge decides whether to grant Plaintiff’s request for pre- * judgment attachment of Defendant’s property and notifies Plaintiff and Defendant of the decision. Pre-judgment attachment order: Defendant's property is attached prior to judgment. Attachment order 7 either involves physical attachment, or is achieved by freezing, registering, marking, or otherwise separating and restricting Defendant’s movement of specific moveable assets. Trial and judgment: Defendant files preliminary objections.: Defendant presents preliminary objections to the court. * (Preliminary exemptions differ from answers on the merits. Examples of preliminary motions are motions to dismiss on the basis of the statute of limitations or jurisdictional objections, etc.) Checke Doing Business 2015 Belarus 80 No. Procedures Plaintiff’s answer to preliminary motions: Plaintiff responds to preliminary motions raised by Defendant. * Checked as ‘yes’ if preliminary motions are commonly raised (step 30) and if Plaintiff responds to them immediately. Defendant files an answer to Plaintiff’s claim: Defendant files a written pleading which includes his answer 8 or defense on the merits of the case (see assumption 4). Plaintiff’s written reply to Defendant's answer: Plaintiff responds to Defendant’s answer with a written 9 pleading, which may or may not include witness statements or expert (witness) statements. Filing of written submissions: Plaintiff and Defendant file written pleadings and submissions with the court 10 and transmit copies of the written pleadings or submissions to one another. The pleadings may or may not include witness statements or expert (witness) statements. Framing of issues: Plaintiff and Defendant assist the court in framing issues on which evidence is to be 11 presented. Court appointment of independent expert: Judge appoints, either at the parties' request or at his own * initiative, an independent expert to decide whether the quality of the goods Plaintiff delivered to Defendant is adequate. (see assumption 5-b). Notification of court-appointment of independent expert: The court notifies both parties that the court is 12 appointing an independent expert (see assumption 5-b). Delivery of expert report by court-appointed expert: The independent expert, appointed by the court, * delivers his or her expert report to the court (see assumption 5-b). * Setting of date(s) for oral hearing or trial: Judge sets the date(s) for the oral hearing or trial. Oral hearing (prevalent in civil law): The parties argue the merits of the case at an oral hearing before the 13 judge. Witnesses and a court-appointed independent expert may be heard and questioned at the oral hearing. 14 Closing of the evidence period: The court makes the formal decision to close the evidence period. Final arguments: The parties present their final factual and legal arguments to the court either by oral * presentation or by a written submission. 15 Writing of judgment: The judge produces a written copy of the judgment. Registration of judgment: The court office registers the judgment after receiving a written copy of the 16 judgment. Court notification of availability of the written judgment: The court notifies the parties that the written 17 judgment is available at the courthouse. Plaintiff receives a copy of the judgment: Plaintiff receives a copy of the written judgment which is 100% 18 in favor of Plaintiff (see assumption 6). Defendant is formally notified of the judgment: Plaintiff or court formally notifies the Defendant of the 19 judgment. The appeal period starts to run from the day the Defendant is formally notified of the judgment. Doing Business 2015 Belarus 81 No. Procedures Appeal period: By law Defendant has the opportunity to appeal the judgment during a specified period. 20 Defendant decides not to appeal. Seller decides to start enforcing the judgment when the appeal period ends (see assumption 8). Order for reimbursement by Defendant of Plaintiff's court fees: The judgment orders Defendant to 21 reimburse Plaintiff for the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff requests an enforcement order: Plaintiff applies to the court to obtain the enforcement order * ('seal' on judgment). Attachment of enforcement order to judgment: The judge attaches the enforcement order (‘seal’) to the 22 judgment. Plaintiff’s request for physical enforcement: As Plaintiff commonly fears that Defendant might physically * resist the taking into custody of its previously attached movable assets, Plaintiff requests the judge or the police authorities to obtain police assistance during the physical enforcement of the Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a 23 private bailiff requests Defendant to voluntarily comply with the judgment. Identification of Defendant's assets by court official or Defendant for purposes of enforcement: The judge, 24 a court enforcement officer, a private bailiff or the Defendant himself identifies Defendant's movable assets for the purposes of enforcing the judgment through a sale of Defendant’s assets. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 25 assets). Report on execution of attachment: A court enforcement officer or private bailiff delivers a report on the 26 attachment of Defendant's movable goods to the judge. Enforcement disputes before court: The enforcement of the judgment is delayed because Defendant 27 opposes aspects of the enforcement process before the judge. Call for public auction: Judge calls a public auction by, for example, advertising or publication in the 28 newspapers. 29 Sale through public auction: The Defendant’s movable property is sold at public auction. 30 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2015 Belarus 82 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient INDICATORS MEASURE companies and reallocating the resources of inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By improving the expectations of creditors Appeals and requests for extension are and debtors about the outcome of insolvency included proceedings, well-functioning insolvency systems can facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and thereby improve growth and estate) sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome of Fees of insolvency administrators insolvency proceedings involving domestic legal Lawyers’ fees entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Assessors’ and auctioneers’ fees dollar recouped by secured creditors through Other related fees reorganization, liquidation or debt enforcement (foreclosure) proceedings. To determine the present Outcome value of the amount recovered by creditors, Doing Whether business continues operating as a Business uses the lending rates from the International going concern or business assets are sold Monetary Fund, supplemented with data from piecemeal central banks and the Economist Intelligence Unit. Recovery rate for creditors In addition, Doing Business evaluates the adequacy Measures the cents on the dollar recovered and integrity of the existing legal framework by secured creditors applicable to liquidation and reorganization proceedings through the strength of insolvency Outcome for the business (survival or not) determines the maximum value that can be framework index. The index tests whether economies recovered adopted internationally accepted good practices in four areas: commencement of proceedings, Official costs of the insolvency proceedings management of debtor’s assets, reorganization are deducted proceedings and creditor participation. Depreciation of furniture is taken into The ranking of the Resolving Insolvency indicator is account based on the recovery rate and the total score of the Present value of debt recovered strength of insolvency framework index. The Strength of insolvency framework index (0- Resolving Insolvency indicator does not measure 16) insolvency proceedings of individuals and financial institutions. The data are derived from survey Sum of the scores of four component indices: responses by local insolvency practitioners and Commencement of proceedings index (0-3) verified through a study of laws and regulations as well as public information on bankruptcy systems. Management of debtor’s assets index (0-6) Reorganization proceedings index (0-3) Creditor participation index (0-4) Doing Business 2015 Belarus 83 RESOLVING INSOLVENCY Where does the economy stand today? Combination of quality regulations and efficient practice According to data collected by Doing Business, Belarus characterize the top-performing economies. How scores 2.0 out of 3 points on the commencement of efficient are insolvency proceedings in Belarus? proceedings index, 5.5 out of 6 points on the According to data collected by Doing Business, resolving management of debtor’s assets index, 0.5 out of 3 points insolvency takes 3.0 years on average and costs 22.0% of on the reorganization proceedings index, and 1.0 out of the debtor’s estate, with the most likely outcome being 4 points on the creditor participation index. Belarus’s that the company will be sold as going concern. The total score on the strength of insolvency framework average recovery rate is 37.3 cents on the dollar. Most index is 9.0 out of 16. indicator sets refer to a case scenario in the largest Globally, Belarus stands at 68 in the ranking of 189 business city of an economy, except for 11 economies for economies on the ease of resolving insolvency (figure which the data are a population-weighted average of the 11.1). The rankings for comparator economies and the 2 largest business cities. See the chapter on distance to regional average ranking provide other useful frontier and ease of doing business ranking at the end of benchmarks for assessing the efficiency of insolvency this profile for more details. proceedings in Belarus. Figure 11.1 How Belarus and comparator economies rank on the ease of resolving insolvency Doing Business 2015 Belarus 84 Source: Doing Business database. Doing Business 2015 Belarus 85 Figure 11.2 Recovery Rate (0-100) - Belarus Source: Doing Business database. Figure 11.3 Strength of insolvency framework index (0-16) - Belarus Source: Doing Business database. Doing Business 2015 Belarus 86 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Belarus (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How has Belarus made resolving insolvency easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Belarus amended regulations governing the activities of DB2011 insolvency administrators and strengthened the protection of creditor rights in bankruptcy. Belarus enhanced its insolvency process by exempting the previously state-owned property of a privatized company from the bankruptcy proceeding, requiring that immovable property DB2013 not sold in the auction be offered to creditors for purchase and allowing immovable property to be sold without proof of state registration in a bankruptcy auction if there are no funds to pay for the registration. Belarus improved its insolvency process through a new insolvency law that, among other things, changes the appointment process for insolvency administrators and DB2014 encourages the sale of assets in insolvency. The law also regulates the liability of shareholders and directors of the insolvent company. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Belarus 87 LABOR MARKET REGULATION Doing Business measures flexibility in the regulation of Doing Business 2015 presents the data for the labor employment, specifically as it affects the hiring and market regulation indicators in an annex. The report redundancy of workers and the rigidity of working hours. does not present rankings of economies on these This year, for the first time, the indicators measuring indicators nor include the topic in the aggregate distance flexibility in labor market regulations focus on those to frontier score or ranking on the ease of doing affecting the food retail industry, using a standardized business. Detailed data collected on labor market case study of a cashier in a supermarket. Also new is that regulations are available on the Doing Business website Doing Business collects data on regulations applying to (http://www.doingbusiness.org). The data on labor employees hired through temporary-work agencies as market regulations are based on a detailed survey of well as on those applying to permanent employees or employment regulations that is completed by local employees hired on fixed-term contracts. The indicators lawyers and public officials. Employment laws and also cover additional areas of labor market regulation, regulations as well as secondary sources are reviewed to including social protection schemes and benefits as well ensure accuracy. To make the data comparable across as labor disputes. economies, several assumptions about the worker and the business are used. Over the period from 2007 to 2011 improvements were made to align the methodology for the labor market The worker: regulation indicators (formerly the employing workers  Is a cashier in a supermarket or a grocery store indicators) with the letter and spirit of the International  Is a full-time employee Labour Organization (ILO) conventions. Only 6 of the 188  Is not a member of the labor union, unless ILO conventions cover areas measured by Doing membership is mandatory Business: employee termination, weekend work, holiday The business: with pay, night work, protection against unemployment  Is a limited liability company (or the equivalent and medical care and sickness benefits. The Doing in the economy) with 60 employees. Business methodology is fully consistent with these 6  Operates a supermarket or grocery store in the conventions. The ILO conventions covering areas related economy’s largest business city. For 11 to the labor market regulation indicators do not include economies the data are also collected for the the ILO core labor standards—8 conventions covering second largest business city. the right to collective bargaining, the elimination of  Is subject to collective bargaining agreements if forced labor, the abolition of child labor and equitable such agreements cover more than 50% of the treatment in employment practices. food retail sector and they apply even to firms that are not party to them. Between 2009 and 2011 the World Bank Group worked  Abides by every law and regulation but does not with a consultative group—including labor lawyers, grant workers more benefits than those employer and employee representatives, and experts mandated by law, regulation or (if applicable) from the ILO, the Organisation for Economic Co- collective bargaining agreements. operation and Development (OECD), civil society and the private sector—to review the methodology for the labor market regulation indicators and explore future areas of research. A full report with the conclusions of the consultative group is available at: http://www.doingbusiness.org/methodology/employing-workers. Doing Business 2015 Belarus LABOR MARKET REGULATION Employment laws are needed to protect workers from the past 5 years did so in ways that increased labor arbitrary or unfair treatment and to ensure efficient market flexibility. What changes did Belarus adopt that contracting between employers and workers. Many affected the Doing Business indicators on labor market economies that changed their labor market regulation in regulation (table 12.1)? Table 12.1 What changes did Belarus make in terms of labor market regulation? DB year Reform Belarus eliminated the requirement for third-party notification DB2010 for redundancy dismissals. Source: Doing Business database. Doing Business 2015 Belarus 89 LABOR MARKET REGULATION What are the details? The data reported here for Belarus are based on a Employment laws and regulations as well as secondary detailed survey of labor market regulation that is sources are reviewed to ensure accuracy. completed by local lawyers and public officials. Difficulty of hiring index Difficulty of hiring covers 4 areas: (i) whether fixed-term wage to the average value added per worker. The contracts are prohibited for permanent tasks; (ii) the average value added per worker is the ratio of an maximum cumulative duration of fixed-term contracts; economy’s GNI per capita to the working-age population (iii) the minimum wage for a cashier, age 19, with 1 year as a percentage of the total population. of work experience; and (iv) the ratio of the minimum Difficulty of hiring index Data Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) 60 Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage applicable to the worker assumed in the case study 166.28 (US$/month) Ratio of minimum wage to value added per worker 0.21 Source: Doing Business database. Doing Business 2015 Belarus 90 LABOR MARKET REGULATION Rigidity of hours index Rigidity of hours covers 7 areas: (i) whether the premium for work on a weekly rest day (as a percentage workweek can extend to 50 hours or more (including of hourly pay); (v) whether there are restrictions on night overtime) for 2 months in a year to respond to a work; (vi) whether there are restrictions on weekly seasonal increase in workload; (ii) the maximum number holiday work; and (vii) the average paid annual leave for of days allowed in the workweek; (iii) the premium for workers with 1 year of tenure, 5 years of tenure and 10 night work (as a percentage of hourly pay); (iv) the years of tenure. Rigidity of hours index Data 50-hour workweek allowed for 2 months a year in case of a seasonal Yes increase in workload? Maximum working days per week 6.0 Premium for night work (% of hourly pay) 20% Premium for work on weekly rest day (% of hourly pay) 100% Major restrictions on night work? No Major restrictions on weekly holiday? No Paid annual leave for a worker with 1 year of tenure (in working days) 18.0 Paid annual leave for a worker with 5 years of tenure (in working days) 18.0 Paid annual leave for a worker with 10 years of tenure (in working days) 18.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 18.0 working days) Source: Doing Business database. Doing Business 2015 Belarus 91 LABOR MARKET REGULATION Difficulty of redundancy index Difficulty of redundancy index looks at 9 questions: (i) whether the employer needs approval from a third party what the length is in months of the maximum to terminate 1 redundant worker; (vi) whether the probationary period; (ii) whether redundancy is employer needs approval from a third party to terminate disallowed as a basis for terminating workers; (iii) a group of 9 redundant workers; (vii) whether the law whether the employer needs to notify a third party (such requires the employer to reassign or retrain a worker as a government agency) to terminate 1 redundant before making the worker redundant; (viii) whether worker; (iv) whether the employer needs to notify a third priority rules apply for redundancies; and (ix) whether party to terminate a group of 9 redundant workers; (v) priority rules apply for reemployment. Difficulty of redundancy index Data Maximum length of probationary period (months) 3.0 Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? No Third-party approval if 1 worker is dismissed? No Third-party notification if 9 workers are dismissed? No Third-party approval if 9 workers are dismissed? No Retraining or reassignment obligation before redundancy? Yes Priority rules for redundancies? Yes Priority rules for reemployment? No Source: Doing Business database. Doing Business 2015 Belarus 92 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice requirements and severance payments applicable to a requirements, severance payments and penalties due worker with 1 year of tenure, a worker with 5 years and when terminating a redundant worker, expressed in a worker with 10 years is considered. One month is weeks of salary. The average value of notice recorded as 4 and 1/3 weeks. Redundancy cost indicator (in salary weeks) Data Notice period for redundancy dismissal for a worker with 1 year of tenure 8.7 Notice period for redundancy dismissal for a worker with 5 years of tenure 8.7 Notice period for redundancy dismissal for a worker with 10 years of tenure 8.7 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 8.7 of tenure) Severance pay for redundancy dismissal for a worker with 1 year of tenure 13.0 Severance pay for redundancy dismissal for a worker with 5 years of tenure 13.0 Severance pay for redundancy dismissal for a worker with 10 years of tenure 13.0 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 13.0 of tenure) Source: Doing Business database. Social protection schemes and benefits & Labor disputes Doing Business collects data on the existence of Doing Business also assesses the mechanisms available unemployment protection schemes as well as data on to resolve labor disputes. More specifically, it collects whether employers are legally required to provide data on what courts would be competent to hear labor health insurance for employees with permanent disputes and whether the competent court is contracts. specialized in resolving labor disputes. Social protection schemes and benefits & Labor disputes indicator Data Availability of unemployment protection scheme? Yes Health insurance existing for permanent employees? Yes Availability of courts or court sections specializing in labor disputes? No Source: Doing Business database. Doing Business 2015 Belarus 93 Doing Business 2015 Belarus 94 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING This year’s report presents results for 2 aggregate defined as the total tax rate at the 15th percentile of the measures: the distance to frontier score and the ease of overall distribution for all years included in the analysis. doing business ranking, which for the first time this year For the time to pay taxes the frontier is defined as the is based on the distance to frontier score. The ease of lowest time recorded among all economies that levy the doing business ranking compares economies with one 3 major taxes: profit tax, labor taxes and mandatory another; the distance to frontier score benchmarks contributions, and value added tax (VAT) or sales tax. In economies with respect to regulatory best practice, addition, the cost to export and cost to import for each showing the absolute distance to the best performance year are divided by the GDP deflator, to take the general on each Doing Business indicator. When compared price level into account when benchmarking these across years, the distance to frontier score shows how absolute-cost indicators across economies with different much the regulatory environment for local entrepreneurs inflation trends. The base year for the deflator is 2013 for in an economy has changed over time in absolute terms, all economies. while the ease of doing business ranking can show only In the same formulation, to mitigate the effects of how much the regulatory environment has changed extreme outliers in the distributions of the rescaled data relative to that in other economies. for most component indicators (very few economies Distance to Frontier need 700 days to complete the procedures to start a business, but many need 9 days), the worst performance The distance to frontier score captures the gap between is calculated after the removal of outliers. The definition an economy’s performance and a measure of best of outliers is based on the distribution for each practice across the entire sample of 31 indicators for 10 component indicator. To simplify the process, 2 rules Doing Business topics (the labor market regulation were defined: the 95th percentile is used for the indicators are excluded). For starting a business, for indicators with the most dispersed distributions example, Canada and New Zealand have the smallest (including time, cost, minimum capital and number of number of procedures required (1), and New Zealand the payments to pay taxes), and the 99th percentile is used shortest time to fulfill them (0.5 days). Slovenia has the for number of procedures and number of documents to lowest cost (0.0), and Australia, Colombia and 110 other trade. No outlier was removed for component indicators economies have no paid-in minimum capital bound by definition or construction, including legal requirement (table 15.1 in the Doing Business 2015 index scores (such as the depth of credit information report). index, extent of conflict of interest regulation index and strength of insolvency framework index) and the Calculation of the distance to frontier score recovery rate (figure 15.1 in the Doing Business 2015 Calculating the distance to frontier score for each report). economy involves 2 main steps. First, individual Second, for each economy the scores obtained for component indicators are normalized to a common unit individual indicators are aggregated through simple where each of the 31 component indicators y (except for averaging into one distance to frontier score, first for the total tax rate) is rescaled using the linear each topic and then across all 10 topics: starting a transformation (worst − y)/(worst − frontier). In this business, dealing with construction permits, getting formulation the frontier represents the best performance electricity, registering property, getting credit, protecting on the indicator across all economies since 2005 or the minority investors, paying taxes, trading across borders, third year after data for the indicator were collected for enforcing contracts and resolving insolvency. More the first time. For legal indicators such as those on complex aggregation methods—such as principal getting credit or protecting minority investors, the components and unobserved components —yield a frontier is set at the highest possible value. For the total ranking nearly identical to the simple average used by tax rate, consistent with the use of a threshold in Doing Business . Thus Doing Business uses the simplest 6 calculating the rankings on this indicator, the frontier is 6 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to Doing Business 2015 Belarus 95 method: weighting all topics equally and, within each overall tax system. Instead, it is mainly empirical in topic, giving equal weight to each of the topic nature. The nonlinear transformation along with the components . threshold reduces the bias in the indicator toward 7 economies that do not need to levy significant taxes on An economy’s distance to frontier score is indicated on a companies like the Doing Business standardized case scale from 0 to 100, where 0 represents the worst study company because they raise public revenue in performance and 100 the frontier. All distance to frontier other ways—for example, through taxes on foreign calculations are based on a maximum of 5 decimals. companies, through taxes on sectors other than However, indicator ranking calculations and the ease of manufacturing or from natural resources (all of which are doing business ranking calculations are based on 2 outside the scope of the methodology). In addition, it decimals. The difference between an economy’s distance acknowledges the need of economies to collect taxes to frontier score in any previous year and its score in from firms. 2014 illustrates the extent to which the economy has closed the gap to the regulatory frontier over time. And Calculation of scores for economies with 2 cities in any given year the score measures how far an covered economy is from the best performance at that time. For each of the 11 economies for which a second city Treatment of the total tax rate was added in this year’s report, the distance to frontier score is calculated as the population-weighted average This year, for the first time, the total tax rate component of the distance to frontier scores for the 2 cities covered of the paying taxes indicator set enters the distance to (table 12.1). This is done for the aggregate score, the frontier calculation in a different way than any other scores for each topic and the scores for all the indicator. The distance to frontier score obtained for the component indicators for each topic. total tax rate is transformed in a nonlinear fashion before it enters the distance to frontier score for paying taxes. Table 12.1 Weights used in calculating the distance to As a result of the nonlinear transformation, an increase in frontier scores for economies with 2 cities covered the total tax rate has a smaller impact on the distance to Economy City Weight (%) frontier score for the total tax rate—and therefore on the Dhaka 78 distance to frontier score for paying taxes—for Bangladesh Chittagong 22 economies with a below-average total tax rate than it São Paulo 61 would have in the calculation done in previous years (line Brazil Rio de Janeiro 39 B is smaller than line A in figure 15.2 of the Doing Shanghai 55 China Business 2015 report). And for economies with an Beijing 45 extreme total tax rate (a rate that is very high relative to Mumbai 47 India the average), an increase has a greater impact on both Delhi 53 these distance to frontier scores than before (line D is Jakarta 78 Indonesia bigger than line C in figure 15.2 of the Doing Business Surabaya 22 Tokyo 65 2015 report). Japan Osaka 35 The nonlinear transformation is not based on any Mexico City 83 Mexico economic theory of an “optimal tax rate” that minimizes Monterrey 17 distortions or maximizes efficiency in an economy’s Lagos 77 Nigeria Kano 23 Karachi 65 Pakistan that from the simple average method because both these methods Lahore 35 assign roughly equal weights to the topics, since the pairwise Moscow 70 Russian Federation correlations among indicators do not differ much. An alternative to the St. Petersburg 30 simple average method is to give different weights to the topics, New York 60 depending on which are considered of more or less importance in the United States Los Angeles 40 context of a specific economy. Source: United Nations, Department of Economic and Social 7 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned Affairs, Population Division, World Urbanization Prospects, to the strength of legal rights index and 40% to the depth of credit 2014 Revision. http://esa.un.org/unpd/wup/CD- information index. Indicators for all other topics are assigned equal ROM/Default.aspx. weights Doing Business 2015 Belarus 96 Economies that improved the most across 3 or more Selecting the economies that implemented regulatory Doing Business topics in 2013/14 reforms in at least 3 topics and had the biggest improvements in their distance to frontier scores is Doing Business 2015 uses a simple method to calculate intended to highlight economies with ongoing, broad- which economies improved the ease of doing business based reform programs. The improvement in the the most. First, it selects the economies that in 2013/14 distance to frontier score is used to identify the top implemented regulatory reforms making it easier to do improvers because this allows a focus on the absolute business in 3 or more of the 10 topics included in this improvement—in contrast with the relative improvement year’s aggregate distance to frontier score. Twenty-one shown by a change in rankings—that economies have economies meet this criterion: Azerbaijan; Benin; the made in their regulatory environment for business. Democratic Republic of Congo; Côte d’Ivoire; the Czech Republic; Greece; India; Ireland; Kazakhstan; Lithuania; the former Yugoslav Republic of Macedonia; Poland; Ease of Doing Business ranking Senegal; the Seychelles; Spain; Switzerland; Taiwan, China; Tajikistan; Togo; Trinidad and Tobago; and the The ease of doing business ranking ranges from 1 to 189. United Arab Emirates. Second, Doing Business sorts these The ranking of economies is determined by sorting the economies on the increase in their distance to frontier aggregate distance to frontier scores, rounded to 2 score from the previous year using comparable data. decimals. Doing Business 2015 Belarus 97 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 189 Contributors http://www.doingbusiness.org/rankings More than 10,700 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 139 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, reform case repreneurship studies and customized economy and regional profiles Distance to frontier http://www.doingbusiness.org/reports Data benchmarking 189 economies to the frontier in regulatory practice Methodology http://www.doingbusiness.org/data/distance-to- The methodologies and research papers underlying frontier Doing Business http://www.doingbusiness.org/methodology Information on good practices Showing where the many good practices identified Research by Doing Business have been adopted Abstracts of papers on Doing Business topics and http://www.doingbusiness.org/data/good-practice related policy issues http://www.doingbusiness.org/research Doing Business iPhone App Doing Business at a Glance—presenting the full Doing Business reforms report, rankings and highlights for each topic for Short summaries of DB2015 business regulation the iPhone, iPad and iPod touch reforms, lists of reforms since DB2008 and a ranking http://www.doingbusiness.org/specialfeatures/ simulation tool iphone http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2015 Belarus 98