83398 Regional Profile: Arab World Doing Business 2014 ARAB WORLD 2 © 2013 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 15 14 13 12 A copublication of The World Bank and the International Finance Corporation. This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. 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. 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Doing Business 2014: Understanding Smarter Regulations for Small and Medium-Size Enterprises. Washington, DC: World Bank Group. DOI: 10.1596/978-0-8213-9615-5. License: Creative Commons Attribution CC BY 3.0 Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. All queries on rights and licenses should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Additional copies of all 11 editions of Doing Business may be purchased at www.doingbusiness.org. Cover design: The Word Express Doing Business 2014 ARAB WORLD 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 12 Dealing with construction permits........................................................................................... 22 Getting electricity ....................................................................................................................... 29 Registering property .................................................................................................................. 36 Getting credit .............................................................................................................................. 43 Protecting investors ................................................................................................................... 50 Paying taxes ................................................................................................................................ 58 Trading across borders .............................................................................................................. 66 Enforcing contracts .................................................................................................................... 77 Resolving insolvency .................................................................................................................. 83 Data notes ................................................................................................................................... 89 Resources on the Doing Business website .............................................................................. 94 Doing Business 2014 ARAB WORLD 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is and OECD High Income. The data in this report are for a local entrepreneur to open and run a small to current as of June 1, 2013 (except for the paying taxes medium-size business when complying with relevant indicators, which cover the period January–December regulations. It measures and tracks changes in 2012). regulations affecting 11 areas in the life cycle of a The Doing Business methodology has limitations. Other business: starting a business, dealing with construction areas important to business—such as an economy’s permits, getting electricity, registering property, proximity to large markets, the quality of its getting credit, protecting investors, paying taxes, infrastructure services (other than those related to trading across borders, enforcing contracts, resolving trading across borders and getting electricity), the insolvency and employing workers. security of property from theft and looting, the In a series of annual reports Doing Business presents transparency of government procurement, quantitative indicators on business regulations and the macroeconomic conditions or the underlying strength protection of property rights that can be compared of institutions—are not directly studied by Doing across 189 economies, from Afghanistan to Zimbabwe, Business. The indicators refer to a specific type of over time. The data set covers 47 economies in Sub- business, generally a local limited liability company Saharan Africa, 33 in Latin America and the Caribbean, operating in the largest business city. Because 25 in East Asia and the Pacific, 25 in Eastern Europe standard assumptions are used in the data collection, and Central Asia, 20 in the Middle East and North comparisons and benchmarks are valid across Africa and 8 in South Asia, as well as 31 OECD high- economies. The data not only highlight the extent of income economies. The indicators are used to analyze obstacles to doing business; they also help identify the economic outcomes and identify what reforms have source of those obstacles, supporting policy makers in worked, where and why. designing regulatory reform. This regional profile presents the Doing Business More information is available in the full report. Doing indicators for economies in Arab World. It also shows Business 2014 presents the indicators, analyzes their the regional average, the best performance globally relationship with economic outcomes and for each indicator and data for the following recommends regulatory reforms. The data, along with comparator regions: Common Market for Eastern and information on ordering the Doing Business 2014 Southern Africa (COMESA), East Asia and the Pacific report, are available on the Doing Business website at (EAP), Europe and Central Asia (ECA), Latin America http://www.doingbusiness.org. Doing Business 2014 ARAB WORLD 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s The ranking on each topic is the simple average of regulatory environment for business, a good place to the percentile rankings on its component start is to find out how it compares with the indicators (see the data notes for more details). regulatory environment in other economies. Doing The aggregate ranking on the ease of doing Business provides an aggregate ranking on the ease business benchmarks each economy’s of doing business based on indicator sets that performance on the indicators against that of all measure and benchmark regulations applying to other economies in the Doing Business sample domestic small to medium-size businesses through (figure 1.1). While this ranking tells much about their life cycle. Economies are ranked from 1 to 189 the business environment in an economy, it does by the ease of doing business index. For each not tell the whole story. The ranking on the ease of economy the index is calculated as the ranking on the doing business, and the underlying indicators, do simple average of its percentile rankings on each of not measure all aspects of the business the 10 topics included in the index in Doing Business environment that matter to firms and investors or 2014: starting a business, dealing with construction that affect the competitiveness of the economy. permits, getting electricity, registering property, Still, a high ranking does mean that the getting credit, protecting investors, paying taxes, government has created a regulatory environment trading across borders, enforcing contracts and conducive to operating a business. resolving insolvency. Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2014 ARAB WORLD 6 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy stands regional average (figure 1.2). Another perspective is in the aggregate ranking on the ease of doing business is provided by the regional average rankings on the topics useful. Also useful is to know how it ranks compared with included in the ease of doing business index (figure 1.3). other economies in the region and compared with the Figure 1.2 How economies in Arab World rank on the ease of doing business *The economy with the best performance globally is included as a benchmark. Source: Doing Business database. Doing Business 2014 ARAB WORLD 7 THE BUSINESS ENVIRONMENT Figure 1.3 How Arab World ranks on Doing Business topics Regional average ranking Source: Doing Business database. Doing Business 2014 ARAB WORLD 8 Figure 1.4 How far has Arab World come in the areas measured by Doing Business? Note: The distance to frontier measure shows how far on average a region is from the best performance achieved by any region on each Doing Business indicator since 2005, except for the getting electricity indicators, which were introduced in 2009. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). The overall distance to frontier is the average of the distance to frontier in the first 9 indicator sets shown in the figure and does not include getting electricity. Data on the overall distance to frontier including getting electricity is available at http://www.doingbusiness.org/data/distance-to-frontier. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2014 ARAB WORLD 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing more significant impact as measured by Doing business tells only part of the story, so do changes in Business. that ranking. Yearly movements in rankings can The absolute values of the indicators tell another part provide some indication of changes in an economy’s of the story (table 1.1). Policy makers can learn much regulatory environment for firms, but they are always by comparing the indicators for their economy with relative. An economy’s ranking might change because those for the lowest- and highest-scoring economies of developments in other economies. An economy that in the region as well as those for the best performers implemented business regulation reforms may fail to globally. These comparisons may reveal unexpected rise in the rankings (or may even drop) if it is passed strengths in an area of business regulation—such as a by others whose business regulation reforms had a regulatory process that can be completed with a small number of procedures in a few days and at a low cost. Table 1.1 Summary of Doing Business indicators for Arab World Lowest regional Best regional Best global Indicator Regional average performance performance performance Starting a Business 37 (United Arab 173 (Mauritania) 117 1 (New Zealand) (rank) Emirates) Procedures (number) 14 (Algeria) 5 (Oman)* 8 1 (New Zealand)* 45.0 (West Bank and Time (days) 8.0 (3 Economies*) 19.6 1.0 (New Zealand) Gaza) Cost (% of income per 184.7 (Djibouti) 0.9 (Bahrain) 35.7 0.0 (Slovenia) capita) Paid-in Min. Capital (% 314.4 (Mauritania) 0.0 (10 Economies*) 69.4 0.0 (112 Economies*) of income per capita) Dealing with 1 (Hong Kong SAR, Construction Permits 189 (Libya) 4 (Bahrain) 103 China) (rank) 6 (Hong Kong SAR, Procedures (number) 24 (Kuwait) 10 (Iraq) 16 China) 44.0 (United Arab Time (days) 270.0 (Sudan) 133.7 26.0 (Singapore) Emirates) Cost (% of income per 2,681.0 (Mauritania) 1.1 (Qatar) 406.4 1.1 (Qatar) capita) Getting Electricity 148 (Algeria) 4 (United Arab Emirates) 76 1 (Iceland) (rank) Procedures (number) 7 (Egypt, Arab Rep.)* 3 (Comoros)* 5 3 (10 Economies*) 35 (United Arab Time (days) 180 (Djibouti)* 82 17 (Germany) Emirates) Doing Business 2014 ARAB WORLD 10 Lowest regional Best regional Best global Indicator Regional average performance performance performance Cost (% of income per 7,487.0 (Djibouti) 4.0 (Qatar) 1,555.5 0.0 (Japan) capita) Registering Property 189 (Libya) 4 (United Arab Emirates) 86 1 (Georgia) (rank) Procedures (number) 10 (Algeria) 2 (3 Economies*) 6 1 (4 Economies*) 6.0 (United Arab Time (days) 63.0 (Algeria) 33.2 1.0 (New Zealand)* Emirates) Cost (% of property 27.8 (Syrian Arab 0.0 (Saudi Arabia) 5.7 0.0 (5 Economies*) value) Republic) Getting Credit (rank) 186 (Libya) 55 (Saudi Arabia) 138 1 (Malaysia)* Strength of legal 1 (3 Economies*) 6 (Comoros) 3 10 (10 Economies*) rights index (0-10) Depth of credit 1 (3 Economies*) 6 (Saudi Arabia)* 4 6 (31 Economies*) information index (0-6) Public registry 0.3 (Djibouti) 28.8 (Tunisia) 9.0 100.0 (Portugal)* coverage (% of adults) Private bureau 19.6 (Egypt, Arab Rep.)* 44.3 (Saudi Arabia) 27.6 100.0 (22 Economies*) coverage (% of adults) Protecting Investors 187 (Libya) 22 (Saudi Arabia) 119 1 (New Zealand) (rank) Extent of disclosure 0 (Sudan) 9 (Lebanon) 5 10 (10 Economies*) index (0-10) Extent of director 1 (4 Economies*) 9 (Kuwait) 4 10 (Cambodia) liability index (0-10) Ease of shareholder 0 (Djibouti) 6 (Tunisia)* 3 10 (3 Economies*) suits index (0-10) Strength of investor 1.7 (Libya) 6.7 (Saudi Arabia) 4.4 9.7 (New Zealand) protection index (0-10) Paying Taxes (rank) 181 (Mauritania) 1 (United Arab Emirates) 73 1 (United Arab Emirates) Payments (number per 3 (Hong Kong SAR, 44 (Yemen, Rep.) 3 (Saudi Arabia) 21 year) China)* 12 (United Arab 12 (United Arab Time (hours per year) 889 (Libya) 233 Emirates) Emirates) Trading Across 179 (Iraq) 4 (United Arab Emirates) 98 1 (Singapore) Borders (rank) Documents to export 10 (Iraq) 3 (United Arab Emirates) 6 2 (Ireland)* Doing Business 2014 ARAB WORLD 11 Lowest regional Best regional Best global Indicator Regional average performance performance performance (number) Time to export (days) 80 (Iraq) 7 (United Arab Emirates) 21 6 (5 Economies*) Cost to export (US$ per 3,550 (Iraq) 595 (Morocco) 1,200 450 (Malaysia) container) Documents to import 5 (United Arab 10 (4 Economies*) 8 2 (Ireland)* (number) Emirates)* Time to import (days) 82 (Iraq) 7 (United Arab Emirates) 26 4 (Singapore) Cost to import (US$ 615 (United Arab 3,650 (Iraq) 1,421 440 (Singapore) per container) Emirates) Enforcing Contracts 179 (Syrian Arab 75 (Mauritania) 122 1 (Luxembourg) (rank) Republic) Time (days) 1,225 (Djibouti) 370 (Mauritania) 659 150 (Singapore) Cost (% of claim) 89.4 (Comoros) 13.5 (Oman) 27.2 0.1 (Bhutan) 55 (Syrian Arab Procedures (number) 36 (Yemen, Rep.) 44 21 (Singapore)* Republic) Resolving Insolvency (5 Economies*) 27 (Bahrain) 113 1 (Japan) (rank) Time (years) 5.0 (Djibouti) 1.3 (Tunisia) 3.1 0.4 (Ireland) Cost (% of estate) 22 (3 Economies*) 4 (Oman) 14 1 (Norway) Recovery rate (cents on 0.0 (5 Economies*) 67.4 (Bahrain) 26.6 92.8 (Japan) the dollar) * 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 2014 ARAB WORLD 12 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for INDICATORS MEASURE business owners and employees. Legal entities 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 Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An Registration in the economy’s largest additional benefit comes with limited liability business city companies. These limit the financial liability of company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. registration, company seal) Where governments make this process easy, more Time required to complete each procedure entrepreneurs start businesses in the formal sector, (calendar days) creating more good jobs and generating more Does not include time spent gathering revenue for the government. information What do the indicators cover? Each procedure starts on a separate day (2 procedures cannot start on the same day). Doing Business measures the ease of starting a Procedures that can be fully completed business in an economy by recording all online are an exception to this rule. procedures officially required or commonly done in practice by an entrepreneur to start up and Procedure considered completed once final document is received formally operate an industrial or commercial business—as well as the time and cost required to No prior contact with officials complete these procedures. It also records the paid-in minimum capital that companies must Cost required to complete each procedure deposit before registration. The ranking on the (% of income per capita) ease of starting a business is the simple average of Official costs only, no bribes the percentile rankings on the 4 component No professional fees unless services required indicators: procedures, time, cost and paid-in by law minimum capital requirement. Paid-in minimum capital (% of income To make the data comparable across economies, per capita) Doing Business uses several assumptions about the business and the procedures. It assumes that all Funds deposited in a bank or with a notary before registration (or within 3 months) information is readily available to the entrepreneur and that there has been no prior contact with • Conducts general commercial or industrial officials. It also assumes that the entrepreneur will activities. pay no bribes. And it assumes that the business: • Has a start-up capital of 10 times income per • Is a 100% domestically owned limited liability capita and has a turnover of at least 100 times company, located in the largest business city. income per capita. • Has between 10 and 50 employees. • Does not qualify for any special benefits. • Does not own real estate. Doing Business 2014 ARAB WORLD 13 STARTING A BUSINESS Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in Arab an answer (figure 2.1). The average ranking of the World to start a business? The global rankings of these region and comparator regions provide a useful economies on the ease of starting a business suggest benchmark. Figure 2.1 How economies in Arab World rank on the ease of starting a business Source: Doing Business database. Doing Business 2014 ARAB WORLD 14 STARTING A BUSINESS The indicators underlying the rankings may be more cost and the paid-in minimum capital requirement revealing. Data collected by Doing Business show (figure 2.2). Comparing these indicators across the what it takes to start a business in each economy in region and with averages both for the region and for the region: the number of procedures, the time, the comparator regions can provide useful insights. Figure 2.2 What it takes to start a business in economies in Arab World Procedures (number) Doing Business 2014 ARAB WORLD 15 STARTING A BUSINESS Time (days) Doing Business 2014 ARAB WORLD 16 STARTING A BUSINESS Cost (% of income per capita) Doing Business 2014 ARAB WORLD 17 STARTING A BUSINESS Paid-in minimum capital (% of income per capita) Source: Doing Business database. Doing Business 2014 ARAB WORLD 18 STARTING A BUSINESS What are the changes over time? Economies around the world have taken steps making stages—and often as part of a larger regulatory reform it easier to start a business—streamlining procedures program. Among the benefits have been greater firm by setting up a one-stop shop, making procedures satisfaction and savings and more registered simpler or faster by introducing technology, and businesses, financial resources and job opportunities. reducing or eliminating minimum capital requirements. What business registration reforms has Doing Business Many have undertaken business registration reforms in recorded in Arab World (table 2.1)? Table 2.1 How have economies in Arab World made starting a business easier—or not? By Doing Business report year DB year Economy Reform The minimum capital required to start a business was cut DB2008 Egypt, Arab Rep. from EGP 50,000 to EGP 1,000, and halved start-up time and cost. Operations within the one-stop shop at the Company Registry were enhanced and a representative of the DB2008 Jordan municipality of Amman was made present at the Company Registry, reducing the number of procedures and the time to start a business. Mauritania made starting a business cheaper by reducing the DB2008 Mauritania registration fees. The minimum capital requirement of 1057% income per DB2008 Saudi Arabia capita was eliminated and company registration was sped up. The Syrian Arab Republic enforced the requirement for Limited Liability Companies and Joint Stock Companies to DB2008 Syrian Arab Republic publish their memorandum of association in the official gazette and showing proof of payment. United Arab Emirates eased the process of starting a business DB2008 United Arab Emirates by allowing the publication of the records of the company to be done at DED Paid in minimum capital was reduced by 20%, and cost was DB2009 Egypt, Arab Rep. reduced as a result of bar association fees’ abolishment and time was cut due to tax registration automation. DB2009 Jordan The minimum paid in capital was reduced by more than 96%. Streamlining of the business registration process resulted in DB2009 Lebanon tremendous time reduction. Simplification of the registration process requirement has DB2009 Mauritania resulted in tremendous time, cost and number of procedures Doing Business 2014 ARAB WORLD 19 DB year Economy Reform reduction. The operationalization of the one-stop shop and the DB2009 Oman simplification of licensing procedures has resulted in reduing the number of procedures and days significantly. Simplification of the start-up processes by eliminating non- DB2009 Saudi Arabia added value formalities and thus reducing registration fees and number of days. New commercial and commercial code simplified the registration process, abolished the court and lawyers DB2009 Syrian Arab Republic involvement in the registration process, and reforms at the tax directorate further simplified tax registration reducing number of procedures and time significantly. DB2009 Tunisia Paid in- minimum capital was abolished. Full operationalization of the Information Management DB2009 West Bank and Gaza System project at the commercial registry resulted in substantial time reduction. The activation of the one-stop shop made it possible to complete stat-up process at once in a single location and made it easier to obtain a license from the municipality and DB2009 Yemen, Rep. to register with the chamber of commerce and the tax office. It also abolished the seal and paid in minimum capital requirements reducing substantially the number of procedures and days. Egypt has eased the business start- up process by abolishing DB2010 Egypt, Arab Rep. the minimum capital requirement. Jordan eased the process of business start up by offering a DB2010 Jordan single reception service for company registration at the company registrar. Lebanon simplified business start up process through the DB2010 Lebanon simplification of the formalities to stamp company books Oman simplified business start up with the introduction of DB2010 Oman online name registration and payment at the registry with a prepaid card Saudi Arabia eased business start up with the introduction of a new one-stop Unified Office at the Ministry of Commerce DB2010 Saudi Arabia that merged registration procedures and simplified the publication requirements. Syria eased business start up by reducing the minimum paid DB2010 Syrian Arab Republic in capital requirement, and allowing access to online standardized incorporation forms. The UAE eased the process of business start-up by abolishing DB2010 United Arab Emirates the minimum capital requirement and removing the Doing Business 2014 ARAB WORLD 20 DB year Economy Reform requirement to show proof of deposit of capital for registration, and further simplified the documents necessary for registration. West Bank & Gaza made it more difficult to start a business DB2010 West Bank and Gaza by increasing the minimum capital requirement Yemen simplified the process of business start up by deleting DB2010 Yemen, Rep. the requirement of obtaining a bank account certificate as a requirement to register the company. DB2011 Egypt, Arab Rep. Egypt reduced the cost to start a business. DB2011 Lebanon Lebanon increased the cost of starting a business. Qatar made starting a business more difficult by adding a DB2011 Qatar procedure to register for taxes and obtain a company seal. Syria eased business start-up by reducing the minimum capital requirement for limited liability companies by two- DB2011 Syrian Arab Republic thirds. It also decentralized approval of the company memorandum. West Bank and Gaza made starting a business more difficult DB2011 West Bank and Gaza by increasing the lawyers’ fees that must be paid for incorporation. Comoros made the process of starting a business more DB2012 Comoros difficult by increasing the minimum capital requirement. In Iraq starting a business became more expensive because of an increase in the cost to obtain a name reservation DB2012 Iraq certificate and in the cost for lawyers to draft articles of association. Jordan made starting a business easier by reducing the minimum capital requirement from 1,000 Jordanian dinars to DB2012 Jordan 1 dinar, of which only half must be deposited before company registration. The one-stop shop in Oman introduced online company DB2012 Oman registration and sped up the process to register a business from 7 days to 3 days. Qatar made starting a business easier by combining DB2012 Qatar commercial registration and registration with the Chamber of Commerce and Industry at the one-stop shop. Saudi Arabia made starting a business easier by bringing together representatives from the Department of Zakat and DB2012 Saudi Arabia Income Tax and the General Organization of Social Insurance at the Unified Center to register new companies with their agencies. DB2012 Syrian Arab Republic Syria eased the starting a business process by reducing the Doing Business 2014 ARAB WORLD 21 DB year Economy Reform minimum capital requirement from SYP 1 million to SYP 400,000 and by reducing the cost of publication from SYP 25,000 to SYP 4,000. The United Arab Emirates made starting a business easier by merging the requirements to file company documents with DB2012 United Arab Emirates the Department for Economic Development, to obtain a trade license and to register with the Dubai Chamber of Commerce and Industry. The Comoros made starting a business easier and less costly by replacing the requirement for a copy of the founders’ DB2013 Comoros criminal records with one for a sworn declaration at the time of the company’s registration and by reducing the fees to incorporate a company. Morocco made starting a business easier by eliminating the DB2013 Morocco minimum capital requirement for limited liability companies. The United Arab Emirates made starting a business easier by eliminating the requirement for a company to prepare a DB2013 United Arab Emirates name board in English and Arabic after having received clearance on the use of office premises. Bahrain made starting a business more expensive by DB2014 Bahrain increasing the cost of the business registration certificate. Comoros made starting a business easier by eliminating the DB2014 Comoros requirement to deposit the minimum capital in a bank before incorporation. Djibouti made starting a business easier by simplifying DB2014 Djibouti registration formalities and eliminating the minimum capital requirement for limited liability companies. Kuwait made starting a business more difficult by increasing DB2014 Kuwait the minimum capital requirement. Morocco made starting a business easier by reducing the DB2014 Morocco company registration fees. Tunisia made starting a business more difficult by increasing DB2014 Tunisia the cost of company registration. West Bank and Gaza made starting a business less costly by DB2014 West Bank and Gaza eliminating the paid-in minimum capital requirement. 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 2014 ARAB WORLD 22 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 PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse (number) time and money, many builders opt out. They may pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Submitting all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, sewerage and a land telephone line Doing Business records the procedures, time and cost for a business in the construction industry to Registering the warehouse after its obtain all the necessary approvals to build a simple completion (if required for use as collateral or commercial warehouse in the economy’s main city, for transfer of warehouse) connect it to basic utilities and register the Time required to complete each procedure property so that it can be used as collateral or (calendar days) transferred to another entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day. percentile rankings on its component indicators: Procedures that can be fully completed online procedures, time and cost. are an exception to this rule. To make the data comparable across economies, Procedure completed once final document is Doing Business uses several assumptions about the received business and the warehouse, including the utility No prior contact with officials connections. The business: Cost required to complete each procedure (% of income per capita) • Is a limited liability company operating in Official costs only, no bribes the construction business and located in the largest business city. • Will be connected to water, sewerage (sewage system, septic tank or their • Is domestically owned and operated. equivalent) and a fixed telephone line. • Has 60 builders and other employees. • The connection to each utility network will be The warehouse: 10 meters (32 feet, 10 inches) long. • Is a new construction (there was no • Will be used for general storage, such as of previous construction on the land). books or stationery (not for goods requiring special conditions). • Has complete architectural and technical plans prepared by a licensed architect or • Will take 30 weeks to construct (excluding all engineer. delays due to administrative and regulatory requirements). Doing Business 2014 ARAB WORLD 23 DEALING WITH CONSTRUCTION PERMITS Where do the region’s economies stand today? How easy it is for entrepreneurs in economies in Arab with construction permits suggest an answer (figure World to legally build a warehouse? The global 3.1). The average ranking of the region and rankings of these economies on the ease of dealing comparator regions provide a useful benchmark. Figure 3.1 How economies in Arab World rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2014 ARAB WORLD 24 DEALING WITH CONSTRUCTION PERMITS The indicators underlying the rankings may be more of procedures, the time and the cost (figure 3.2). revealing. Data collected by Doing Business show what Comparing these indicators across the region and with it takes to comply with formalities to build a averages both for the region and for comparator warehouse in each economy in the region: the number regions can provide useful insights. Figure 3.2 What it takes to comply with formalities to build a warehouse in economies in Arab World Procedures (number) Doing Business 2014 ARAB WORLD 25 DEALING WITH CONSTRUCTION PERMITS Time (days) Doing Business 2014 ARAB WORLD 26 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) * Indicates a “no practice” mark. See the data notes for details. Source: Doing Business database. Doing Business 2014 ARAB WORLD 27 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in Arab World (table 3.1)? Construction is one of them. In an effort to ensure Table 3.1 How have economies in Arab World made dealing with construction permits easier—or not? By Doing Business report year DB year Economy Reform Egypt made obtaining construction permits less expensive DB2008 Egypt, Arab Rep. by reducing the fee for building registeration. Kuwait made obtaining construction permits faster by DB2008 Kuwait introducing a new automated system for utility approvals and therefore reduced the total time. Morocco made obtaining construction permits easier by DB2008 Morocco introducing a one-stop shop which made the permit application less time consuming. Egypt passed a new building code in 2008 that aims to DB2009 Egypt, Arab Rep. establish a single window for processing construction related approvals and reduce procedures and time. Mauritania introduced its first building code. This simplifies DB2009 Mauritania the requirements for small construction projects and lays the groundwork for a one-stop shop for building permits. Rising prices for construction materials and price indexation DB2009 West Bank and Gaza increased the cost of dealing with building permits by ILS 14,923.499. Algeria introduced new regulations to better administer the DB2010 Algeria construction permitting process and ensure the timely and safe completion of construction projects. Bahrain made obtaining construction permits easier by further consolidating preliminary approvals for building DB2010 Bahrain permits in the One-Stop Shop; and reducing the time to obtain a building permit. Doing Business 2014 ARAB WORLD 28 DB year Economy Reform Egypt continued to ease the process of dealing with construction permits with the issuance of the Executive DB2010 Egypt, Arab Rep. Articles of the 2008 Construction Law, and eliminating most pre-approvals for construction permits. Jordan eased the process of dealing with construction permits by extending the services of the one-stop shop at DB2010 Jordan the Greater Amman to mid-size commercial construction projects in 2009. Saudi Arabia sped up the process of dealing with construction permits by introducing a 1 day permitting DB2010 Saudi Arabia procedure, where builders can obtain a temporary building permit allowing them to begin construction after 1 day and a final building permit after 1 week. The United Arab Emirates continued to improve it's online DB2010 United Arab Emirates system for processing building permits, which sped up building permit delivery times. Saudi Arabia made dealing with construction permits easier DB2011 Saudi Arabia for the second year in a row by introducing a new, streamlined process. Djibouti made dealing with construction permits costlier by DB2012 Djibouti increasing the fees for inspections and the building permit and adding a new inspection in the preconstruction phase. Mauritania made dealing with construction permits easier by DB2012 Mauritania opening a one-stop shop. Morocco made dealing with construction permits easier by DB2012 Morocco opening a one-stop shop. Qatar made dealing with construction permits more difficult DB2012 Qatar by increasing the time and cost to process building permits. 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 2014 ARAB WORLD 29 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for Completing all required notifications and a local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized Obtaining external installation works and warehouse, as well as the time and cost to possibly purchasing material for these works complete them. These procedures include Concluding any necessary supply contract and applications and contracts with electricity utilities, obtaining final supply clearances from other agencies and the external and final connection works. The ranking on the Time required to complete each procedure ease of getting electricity is the simple average of (calendar days) the percentile rankings on its component Is at least 1 calendar day indicators: procedures, time and cost. To make the Each procedure starts on a separate day data comparable across economies, several assumptions are used. Does not include time spent gathering information The warehouse: Reflects the time spent in practice, with little • Is located in the economy’s largest follow-up and no prior contact with officials business city, in an area where other Cost required to complete each procedure (% warehouses are located. of income per capita) • Is not in a special economic zone where Official costs only, no bribes the connection would be eligible for subsidization or faster service. Excludes value added tax • Has road access. The connection works involve the crossing of a road or roads but are carried out on public land. • Is 150 meters long. • Is a new construction being connected to • Is to either the low-voltage or the medium- electricity for the first time. voltage distribution network and either • Has 2 stories, both above ground, with a overhead or underground, whichever is more total surface of about 1,300.6 square common in the economy and in the area meters (14,000 square feet), and is built on where the warehouse is located. The length a plot of 929 square meters (10,000 square of any connection in the customer’s private feet). domain is negligible. The electricity connection: • Requires crossing of a 10-meter road but all the works are carried out in a public land, so • Is a 3-phase, 4-wire Y, 140-kilovolt-ampere there is no crossing into other people's (kVA) (subscribed capacity) connection. private property. Doing Business 2014 ARAB WORLD 30 • Involves installing one electricity meter. The monthly electricity consumption will be 0.07 gigawatt-hour (GWh). The internal electrical wiring has been completed. Doing Business 2014 ARAB WORLD 31 GETTING ELECTRICITY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in Arab average ranking of the region and comparator regions World to connect a warehouse to electricity? The provide a useful benchmark. global rankings of these economies on the ease of getting electricity suggest an answer (figure 4.1). The Figure 4.1 How economies in Arab World rank on the ease of getting electricity Source: Doing Business database. Doing Business 2014 ARAB WORLD 32 GETTING ELECTRICITY The indicators underlying the rankings may be more time and the cost (figure 4.2). Comparing these revealing. Data collected by Doing Business show what indicators across the region and with averages both for it takes to get a new electricity connection in each the region and for comparator regions can provide economy in the region: the number of procedures, the useful insights. Figure 4.2 What it takes to get an electricity connection in economies in Arab World Procedures (number) Doing Business 2014 ARAB WORLD 33 GETTING ELECTRICITY Time (days) Doing Business 2014 ARAB WORLD 34 GETTING ELECTRICITY Cost (% of income per capita) Source: Doing Business database. Doing Business 2014 ARAB WORLD 35 GETTING ELECTRICITY What are the changes over time? Obtaining an electricity connection is essential to safety in the connection process while keeping enable a business to conduct its most basic connection costs reasonable, governments around the operations. In many economies the connection world have worked to consolidate requirements for process is complicated by the multiple laws and obtaining an electricity connection. What reforms in regulations involved—covering service quality, general getting electricity has Doing Business recorded in Arab safety, technical standards, procurement practices and World (table 4.1)? internal wiring installations. In an effort to ensure Table 4.1 How have economies in Arab World made getting electricity easier—or not? By Doing Business report year DB year Economy Reform Lebanon made getting electricity less costly by reducing the DB2012 Lebanon application fees and security deposit for a new connection. Saudi Arabia made getting electricity more expensive by DB2013 Saudi Arabia increasing the connection fees. In the United Arab Emirates the Dubai Electricity and Water Authority made getting electricity easier by introducing an DB2013 United Arab Emirates electronic “one window, one step” application process allowing customers to submit and track their applications online and reducing the time for processing the applications. The United Arab Emirates made getting electricity easier by DB2014 United Arab Emirates eliminating the requirement for site inspections and reducing the time required to provide new connections. Source: Doing Business database. Doing Business 2014 ARAB WORLD 36 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 Procedures to legally transfer title on again. And where property is informal or poorly immovable property (number) administered, it has little chance of being accepted as collateral for loans—limiting access to Preregistration procedures (for example, finance. checking for liens, notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration procedures in the economy’s Doing Business records the full sequence of largest business city procedures necessary for a business to purchase Postregistration procedures (for example, filing property from another business and transfer the title with the municipality) property title to the buyer’s name. The transaction Time required to complete each procedure is considered complete when it is opposable to (calendar days) third parties and when the buyer can use the property, use it as collateral for a bank loan or Does not include time spent gathering resell it. The ranking on the ease of registering information property is the simple average of the percentile Each procedure starts on a separate day. rankings on its component indicators: procedures, Procedures that can be fully completed online time and cost. are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final several assumptions about the parties to the document is received transaction, the property and the procedures are No prior contact with officials used. Cost required to complete each procedure (% The parties (buyer and seller): of property value) • Are limited liability companies, 100% Official costs only, no bribes domestically and privately owned. No value added or capital gains taxes included • Are located in the periurban area of the economy’s largest business city. • Have 50 employees each, all of whom are nationals. • Has no mortgages attached and has been under the same ownership for the past 10 • Perform general commercial activities. 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 square feet). The warehouse is in good • Is registered in the land registry or condition and complies with all safety cadastre, or both, and is free of title standards, building codes and legal disputes. requirements. There is no heating system. The • Is located in a periurban commercial zone, property will be transferred in its entirety. and no rezoning is required. Doing Business 2014 ARAB WORLD 37 REGISTERING PROPERTY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in Arab suggest an answer (figure 5.1). The average ranking of World to transfer property? The global rankings of the region and comparator regions provide a useful these economies on the ease of registering property benchmark. Figure 5.1 How economies in Arab World rank on the ease of registering property Source: Doing Business database. Doing Business 2014 ARAB WORLD 38 REGISTERING PROPERTY The indicators underlying the rankings may be more the time and the cost (figure 5.2). Comparing these revealing. Data collected by Doing Business show indicators across the region and with averages both what it takes to complete a property transfer in each for the region and for comparator regions can economy in the region: the number of procedures, provide useful insights. Figure 5.2 What it takes to register property in economies in Arab World Procedures (number) Doing Business 2014 ARAB WORLD 39 REGISTERING PROPERTY Time (days) Doing Business 2014 ARAB WORLD 40 REGISTERING PROPERTY Cost (% of property value) * Indicates a “no practice” mark. See the data notes for details. Source: Doing Business database. Doing Business 2014 ARAB WORLD 41 REGISTERING PROPERTY What are the changes over time? Economies worldwide have been making it easier for buyers to use or mortgage their property earlier. What entrepreneurs to register and transfer property—such property registration reforms has Doing Business as by computerizing land registries, introducing time recorded in Arab World (table 5.1)? limits for procedures and setting low fixed fees. Many have cut the time required substantially—enabling Table 5.1 How have economies in Arab World made registering property easier—or not? By Doing Business report year DB year Economy Reform Property registration was sped up by improving efficiency at DB2008 Djibouti the Service des Domaines. The cost of registering property was reduced from 3% of the DB2008 Egypt, Arab Rep. property value to a low fixed fee. Morocco made registering property more cumbersome by implementing the requirement to check several tax agencies, DB2008 Morocco rather than just one, in order to obtain a tax clearance certificate. Property registry files were computerized, reducing the time DB2008 Tunisia needed to register a property. Egypt simplified administrative procedures, reorganized the business workflow between the real estate registry and the DB2009 Egypt, Arab Rep. Egyptian Surveying Authority (ESA) and introduced time limits in several procedures. These reforms decreased the time to transfer a property in Cairo from 193 to 72 days. Saudi Arabia adopted a comprehensive electronic system of registering title deeds. Procedures that were done manually, such as sending the original title deed to the Records DB2009 Saudi Arabia Department or copy the details of the transaction are now done electronically from the Notary Public’s office. As a result, the parties can transfer a property in 2 procedures and 2 days. DB2010 Algeria Algeria has made it easier and less costly to register property by reducing notary fees by 0.39% of the value of the property, Doing Business 2014 ARAB WORLD 42 DB year Economy Reform and eliminating the capital gains tax. Jordan reduced property transfer fees from 10 to 7.5% of DB2010 Jordan property value. The West Bank and Gaza has sped up the process of DB2010 West Bank and Gaza registering property with a major project to computerize records at the land registry. Bahrain made registering property more burdensome by DB2011 Bahrain increasing the fees at the Survey and Land Registration Bureau. The Comoros made it easier to transfer property by reducing DB2013 Comoros the property transfer tax. Morocco made registering property more costly by increasing DB2013 Morocco property registration fees. West Bank and Gaza made transferring property more costly DB2013 West Bank and Gaza by increasing the property transfer fee. Morocco made transferring property easier by reducing the DB2014 Morocco time required to register a deed of transfer at the tax authority. The United Arab Emirates made transferring property easier DB2014 United Arab Emirates by increasing the operating hours of the land registry and reducing transfer fees. 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 2014 ARAB WORLD 43 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 the borrowers and lenders’ rights in collateral and bankruptcy laws. Credit information Strength of legal rights index (0–10) systems enable lenders to view a potential borrower’s financial history (positive or negative)— Protection of rights of borrowers and lenders valuable information to consider when assessing through collateral laws risk. And they permit borrowers to establish a good Protection of secured creditors’ rights through credit history that will allow easier access to credit. bankruptcy laws Sound collateral laws enable businesses to use their assets, especially movable property, as security to Depth of credit information index (0–6) generate capital—while strong creditors’ rights Scope and accessibility of credit information have been associated with higher ratios of private distributed by public credit registries and sector credit to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit information index measures rules and practices Private credit bureau coverage (% of adults) affecting the coverage, scope and accessibility of Number of individuals and firms listed in credit information available through a public credit largest private credit bureau as percentage of registry or a private credit bureau. The strength of adult population legal rights index measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses case scenarios to determine the scope of the • Has up to 100 employees. secured transactions system, involving a secured • Is 100% domestically owned, as is the lender. borrower and a secured lender and examining legal The ranking on the ease of getting credit is based on restrictions on the use of movable collateral. These the percentile rankings on the sum of its component scenarios assume that the borrower: indicators: the depth of credit information index and • Is a private, incorporated, limited liability the strength of legal rights index. company. • Has its headquarters and only base of operations in the largest business city. Doing Business 2014 ARAB WORLD 44 GETTING CREDIT Where do the region’s economies stand today? How well do the credit information systems and an answer (figure 6.1). The average ranking of the collateral and bankruptcy laws in economies in Arab region and comparator regions provide a useful World facilitate access to credit? The global rankings of benchmark. these economies on the ease of getting credit suggest Figure 6.1 How economies in Arab World rank on the ease of getting credit Source: Doing Business database. Doing Business 2014 ARAB WORLD 45 GETTING CREDIT Another way to assess how well regulations and particular score on the strength of legal rights index. institutions support lending and borrowing in the Figure 6.3 shows the same thing for the depth of credit region is to look at the distribution of its economies by information index. Higher scores indicate stronger their scores on the getting credit indicators. Figure 6.2 legal rights for borrowers and lenders and more credit shows how many economies in the region received a information. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How extensive—and how accessible—is and lenders in economies in Arab World? credit information in economies in Arab World? Number of economies in region with each score on strength Number of economies in region with each score on depth of of legal rights index (0–10) credit information index (0–6) 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. Source: Doing Business database. Doing Business 2014 ARAB WORLD 46 GETTING CREDIT What are the changes over time? When economies strengthen the legal rights of lenders credit information, they can increase entrepreneurs’ and borrowers under collateral and bankruptcy laws, access to credit. What credit reforms has Doing and increase the scope, coverage and accessibility of Business recorded in Arab World (table 6.1)? Table 6.1 How have economies in Arab World made getting credit easier—or not? By Doing Business report year DB year Economy Reform Egypt eased the access to credit information by creating a new private credit bureau. The new credit bureau will DB2008 Egypt, Arab Rep. distribute negative data about consumers and firms. It is guaranteed by law that borrowers can access the credit information stored in the private bureau. The private credit bureau has added retailers to its DB2008 Kuwait information suppliers database The credit information index for the private bureau was DB2008 Saudi Arabia enhanced by launching a commercial credit bureau that issues reports including the credit exposure of companies. Credit information was enhanced by lowering the minimum DB2008 Tunisia loan requirement at its public registry from 20,000 DT to zero. The public credit registry lowered the minimum loan requirement from 10,000 USD to 0, and instructed all the DB2008 West Bank and Gaza banks to disclose all loans granted to customers without minimum requirements; coverage has tripled. Borrowers have the right to inspect the data stored in the private credit bureau, thanks to new regulations from the DB2009 Egypt, Arab Rep. Central bank of Egypt. Allowing borrowers to check their data helps improve the quality and accuracy of credit information in Egypt New regulations in Morocco guarantee the right of borrowers to inspect the data stored in the public credit registry. By DB2009 Morocco being able to review their credit information, borrowers help improve the quality and accuracy of the credit data utilized by financial institutions DB2009 Tunisia After a legal reform, Tunisia now collects and distributes more detailed information from banks, including positive Doing Business 2014 ARAB WORLD 47 DB year Economy Reform information (like loan amounts) and negative information (like arrears and defaults). Also, it is now guaranteed by law that individuals and firms can consult their credit data in all Central Bank offices. United Arab Emirates established a new private credit bureau that collects information on all loans. Borrowers also have the right to inspect their credit data in the new bureau. DB2009 United Arab Emirates The bureau will significantly increase the capacity of banks to better assess the credit worthiness of borrowers. West Bank and Gaza’s public credit registry set up an online system for banks to update information and obtain credit DB2009 West Bank and Gaza reports. Facilitating the exchange of information increases the quality and scope of information distributed by the public credit registry. Access to credit information in Egypt has expanded with the DB2010 Egypt, Arab Rep. addition of retailers to the database of the private credit bureau, I-score. Morocco has strengthened access to credit with a new private DB2010 Morocco credit bureau which started operations in March 2009. Yemen improved its access to credit information by removing the minimum loan threshold for inclusion in the database and DB2010 Yemen, Rep. guaranteeing the right of borrowers to view their credit reports. Jordan improved its credit information system by setting up a regulatory framework for establishing a private credit bureau DB2011 Jordan as well as lowering the threshold for loans to be reported to the public credit registry. Lebanon improved its credit information system by allowing DB2011 Lebanon banks online access to the public credit registry’s reports. An amendment to Saudi Arabia’s commercial lien law enhanced access to credit by making secured lending more DB2011 Saudi Arabia flexible and allowing out-of-court enforcement in case of default. Syria enhanced access to credit by eliminating the minimum DB2011 Syrian Arab Republic threshold for loans included in the database, which expanded the coverage of individuals and firms to 2.8% of the adult Doing Business 2014 ARAB WORLD 48 DB year Economy Reform population. The United Arab Emirates enhanced access to credit by setting up a legal framework for the operation of the private DB2011 United Arab Emirates credit bureau and requiring that financial institutions share credit information. Algeria improved its credit information system by DB2012 Algeria guaranteeing by law the right of borrowers to inspect their personal data. Access to credit in Comoros was improved through amendments to the OHADA Uniform Act on Secured Transactions that broaden the range of assets that can be DB2012 Comoros used as collateral (including future assets), extend the security interest to the proceeds of the original asset and introduce the possibility of out-of-court enforcement. Oman improved its credit information system by launching the Bank Credit and Statistical Bureau System, which collects DB2012 Oman historical information on performing and nonperforming loans for both firms and individuals. Qatar improved its credit information system by starting to DB2012 Qatar distribute historical data and eliminating the minimum threshold for loans included in the database. The United Arab Emirates improved its credit information system through a new law allowing the establishment of a DB2012 United Arab Emirates federal credit bureau under the supervision of the central bank. Algeria improved access to credit information by eliminating DB2013 Algeria the minimum threshold for loans to be included in the database. Oman improved access to credit information by guaranteeing DB2013 Oman borrowers’ right to inspect their personal data. Syria improved access to credit information by establishing an online system for data exchange between all banks and DB2013 Syrian Arab Republic microfinance institutions and the central bank’s credit registry. DB2013 West Bank and Gaza West Bank and Gaza improved access to credit information by guaranteeing borrowers’ right to inspect their personal Doing Business 2014 ARAB WORLD 49 DB year Economy Reform data. Bahrain improved access to credit information by starting to DB2014 Bahrain collect payment information from retailers. Djibouti strengthened its secured transactions system by DB2014 Djibouti adopting a new commercial code, which broadens the range of movable assets that can be used as collateral. 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 2014 ARAB WORLD 50 PROTECTING INVESTORS Protecting investors matters for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not protect minority shareholders, investors may be Extent of disclosure index (0–10) reluctant to provide funding to companies through the purchase of shares unless they become the Approval process for related-party controlling shareholders. Effective regulations define transactions related-party transactions precisely, promote clear Disclosure requirements in case of related- and efficient disclosure requirements, require party transactions shareholder participation in major decisions of the company and set detailed standards of accountability Extent of director liability index (0–10) for company insiders. Ability of minority shareholders to file a direct or derivative lawsuit What do the indicators cover? Ability of minority shareholders to hold Doing Business measures the strength of minority interested parties and members of the shareholder protections against directors’ use of approving body liable for prejudicial related- corporate assets for personal gain—or self-dealing. party transactions The indicators distinguish 3 dimensions of investor Available legal remedies (damages, protections: transparency of related-party disgorgement of profits, fines, imprisonment transactions (extent of disclosure index), liability for and rescission of the transaction) self-dealing (extent of director liability index) and minority shareholders’ access to evidence before and Ease of shareholder suits index (0–10) during (ease of shareholder suits index). The ranking Access to internal corporate documents on the strength of investor protection index is the (directly or through a government inspector) simple average of the percentile rankings on these 3 indices. To make the data comparable across Documents and information available during trial economies, a case study uses several assumptions about the business and the transaction. Strength of investor protection index (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of • Is a publicly traded corporation listed on the shareholder suits indices economy’s most important stock exchange (or at least a large private company with multiple shareholders). • The price is higher than the going price for used trucks, but the transaction goes forward. • Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of • All required approvals are obtained, and all Buyer where permitted, even if this is not required disclosures made, though the specifically required by law. transaction is prejudicial to Buyer. The transaction involves the following details: • Shareholders sue the interested parties and the members of the board of directors. • Mr. James, a director and the majority shareholder of the company, proposes that the company purchase used trucks from another company he owns. Doing Business 2014 ARAB WORLD 51 Doing Business 2014 ARAB WORLD 52 PROTECTING INVESTORS Where do the region’s economies stand today? How strong are investor protections against self- related to the protection of minority investors, a higher dealing in economies in Arab World? The global ranking does indicate that an economy’s regulations rankings of these economies on the strength of offer stronger investor protections against self-dealing investor protection index suggest an answer (figure in the areas measured. 7.1). While the indicator does not measure all aspects Figure 7.1 How economies in Arab World rank on the strength of investor protection index Source: Doing Business database. Doing Business 2014 ARAB WORLD 53 PROTECTING INVESTORS But the overall ranking on the strength of investor shareholder suits indices may also be revealing (figure protection index tells only part of the story. Economies 7.2). Higher scores indicate stronger investor may offer strong protections in some areas but not protections. Comparing the scores across the region others. So the number of economies in Arab World on the strength of investor protection index and with that have a certain score recorded on the extent of averages both for the region and for comparator disclosure, extent of director liability and ease of regions can provide useful insights. Figure 7.2 How strong are investor protections in economies in Arab World? Strength of investor protection index (0–10) Source: Doing Business database. Doing Business 2014 ARAB WORLD 54 PROTECTING INVESTORS Extent of disclosure index (0–10) Extent of director liability index (0–10) Number of economies in region with each score on extent of Number of economies in region with each score on extent of disclosure index (0–10) director liability index (0–10) Note: Higher scores indicate greater disclosure. Note: Higher scores indicate greater liability of directors. Source: Doing Business database. Source: Doing Business database. Doing Business 2014 ARAB WORLD 55 PROTECTING INVESTORS Ease of shareholder suits index (0–10) Number of economies in region with each score on ease of shareholder suits index (0–10) Note: Higher scores indicate greater powers of shareholders to challenge the transaction. Source: Doing Business database. Doing Business 2014 ARAB WORLD 56 PROTECTING INVESTORS What are the changes over time? Economies with the strongest protections of minority reasonable time. So reforms to strengthen 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 as through new or amended company laws, securities well-functioning courts and up-to-date procedural regulations or revisions to court procedures. What rules that give minority shareholders the means to investor protection reforms has Doing Business prove their case and obtain a judgment within a recorded in Arab World (table 7.1)? Table 7.1 How have economies in Arab World strengthened investor protections—or not? By Doing Business report year DB year Economy Reform Egypt strengthened investor protections by requiring that an DB2009 Egypt, Arab Rep. independent body (auditor) assess transactions between interested parties as a prior step to approval. Saudi Arabia strengthened investor protections by prohibiting DB2009 Saudi Arabia interested parties to vote on the approval of related-party transactions, and by increasing sanctions against directors. Tunisia strengthened investor protections by allowing DB2009 Tunisia minority investors to request in court the rescission of prejudicial related-party transactions. Tunisia amended the Code des Sociétés Commerciales that DB2010 Tunisia strengthened investor protections by requiring greater corporate disclosure. Morocco strengthened investor protections by requiring DB2011 Morocco greater disclosure in companies’ annual reports. Morocco strengthened investor protections by allowing DB2012 Morocco minority shareholders to obtain any nonconfidential corporate document during trial. Kuwait strengthened investor protections by making it DB2014 Kuwait possible for minority shareholders to request the appointment of an auditor to review the company’s activities. DB2014 United Arab Emirates The United Arab Emirates strengthened investor protections by introducing greater disclosure requirements for related- Doing Business 2014 ARAB WORLD 57 DB year Economy Reform party transactions in the annual report and to the stock exchange and by making it possible to sue directors when such transactions harm 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 2014 ARAB WORLD 58 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless Tax payments for a manufacturing company complexity in tax rules avoided. According to in 2012 (number per year adjusted for Doing Business data, in economies where it is more electronic or joint filing and payment) difficult and costly to pay taxes, larger shares of economic activity end up in the informal sector— Total number of taxes and contributions paid, including consumption taxes (value added tax, where businesses pay no taxes at all. sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures the taxes and mandatory contributions that a Time required to comply with 3 major taxes medium-size company must pay in a given year as (hours per year) well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about Completing tax return forms, filing with transactions made over the year. Information is proper agencies also compiled on the frequency of filing and Arranging payment or withholding payments as well as time taken to comply with tax laws. The ranking on the ease of paying taxes is Preparing separate tax accounting books, if the simple average of the percentile rankings on required its component indicators: number of annual Total tax rate (% of profit) payments, time and total tax rate, with a threshold 1 being applied to the total tax rate. To make the Profit or corporate income tax data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes • TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2011. transactions taxes • The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes and mandatory contributions paid during • Taxes and mandatory contributions include the second year of operation are recorded. corporate income tax, turnover tax and all labor taxes and contributions paid by the • Taxes and mandatory contributions are company. measured at all levels of government. • A range of standard deductions and exemptions are also recorded. 1 The threshold is defined as the highest total tax rate among the top 15% of economies in the ranking on the total tax rate. It is calculated and adjusted on a yearly basis. The threshold is not based 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 at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the indicators toward economies that do not need to levy significant taxes on 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 25.5%. Doing Business 2014 ARAB WORLD 59 PAYING TAXES Where do the region’s economies stand today? What is the administrative burden of complying with information for assessing the tax compliance burden taxes in economies in Arab World—and how much do for businesses (figure 8.1). The average ranking of the firms pay in taxes? The global rankings of these region and comparator regions provide a useful economies on the ease of paying taxes offer useful benchmark. Figure 8.1 How economies in Arab World rank on the ease of paying taxes Note: For all economies with a total tax rate below the threshold of 25.5% applied in DB2014, the total tax rate is set at 25.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2014 ARAB WORLD 60 PAYING TAXES The indicators underlying the rankings may be more as well as the total tax rate (figure 8.2). Comparing revealing. Data collected by Doing Business show what these indicators across the region and with averages it takes to comply with tax regulations in each both for the region and for comparator regions can economy in the region—the number of payments per provide useful insights. year and the time required to prepare and file taxes— Figure 8.2 How easy is it to pay taxes in economies in Arab World—and what are the total tax rates? Payments (number per year) Doing Business 2014 ARAB WORLD 61 PAYING TAXES Time (hours per year) Doing Business 2014 ARAB WORLD 62 PAYING TAXES Total tax rate (% of profit) Source: Doing Business database. Doing Business 2014 ARAB WORLD 63 PAYING TAXES What are the changes over time? 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 consolidating filings, reducing the frequency of rise. What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Arab World (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How have economies in Arab World made paying taxes easier—or not? By Doing Business report year DB year Economy Reform DB2008 Syrian Arab Republic No impact on Doing Business 2008 indicators. DB2008 Tunisia No impact on Doing Business 2008 indicators. West Bank and Gaza reduced the tax burden for companies DB2008 West Bank and Gaza by reducing the CIT rate Effective 2008, the corporate income tax rate will be reduced from 35% to 30%. Gains made from sale of certain buildings DB2009 Morocco exempt from Capital Gains Tax. Fixed registration duty rates on deeds are abolished and the various tax rates on insurance contracts are increased. On March 15, 2008, the Ministry of Finance introduced the DB2009 Tunisia option for téléliquidation which enables online declaration of taxes accompanied by physical payments at the tax bureaus. Algeria reduced the corporate income tax rate from 25% to DB2010 Algeria 19% for production of goods, construction and public works and tourism. Djibouti eased the burden of paying taxes on businesses by DB2010 Djibouti introducing VAT of 7% on the supply of goods and services to replace the consumption tax Jordan eased the process of paying taxes for business with DB2010 Jordan the introduction of an online filing and payment system, and a simplification of filing forms. DB2010 Lebanon Lebanon has made it easier to pay taxes by removing the Doing Business 2014 ARAB WORLD 64 DB year Economy Reform requirement to obtain permission to use accelerated depreciation, and by introducing electronic payment. A new tax law in Oman has been legislated to modernise the DB2010 Oman existing tax regime and simplify procedures. The new tax law in Sudan has reduced the tax burden on business by reducing the corporate tax rate by an average of DB2010 Sudan 15% and the capital gains tax by 5% on average, while the tax on labor has been abolished. Tunisia has increased the tax cost of employment by raising DB2010 Tunisia social security contributions. Jordan abolished certain taxes and made it possible to file DB2011 Jordan income and sales tax returns electronically. Tunisia introduced the use of electronic systems for payment DB2011 Tunisia of corporate income tax and value added tax. Morocco eased the administrative burden of paying taxes for DB2012 Morocco firms by enhancing electronic filing and payment of the corporate income tax and value added tax. Oman enacted a new income tax law that redefined the scope DB2012 Oman of taxation. The Republic of Yemen enacted a new tax law that reduced the general corporate tax rate from 35% to 20% and DB2012 Yemen, Rep. abolished all tax exemptions except those granted under the investment law for investment projects. Saudi Arabia made paying taxes easier for companies by DB2013 Saudi Arabia introducing online filing and payment systems for social security contributions. The United Arab Emirates made paying taxes easier for DB2013 United Arab Emirates companies by establishing an online filing and payment system for social security contributions. Egypt made paying taxes more costly for companies by DB2014 Egypt, Arab Rep. increasing the corporate income tax rate. Doing Business 2014 ARAB WORLD 65 DB year Economy Reform Mauritania made paying taxes more costly for companies by DB2014 Mauritania introducing a new health insurance contribution for employers that is levied on gross salaries. Morocco made paying taxes easier for companies by DB2014 Morocco increasing the use of the electronic filing and payment system for social security contributions. Qatar made paying taxes easier for companies by eliminating DB2014 Qatar certain requirements associated with the corporate income tax return. 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 2014 ARAB WORLD 66 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 extra costs and delays for exporters and importers, Documents required to export and import stifling trade potential. Research shows that (number) exporters in developing countries gain more from Bank documents a 10% drop in their trading costs than from a Customs clearance documents similar reduction in the tariffs applied to their products in global markets. Port and terminal handling documents What do the indicators cover? Transport documents Doing Business measures the time and cost Time required to export and import (days) (excluding tariffs and the time and cost for sea Obtaining, filling out and submitting all the transport) associated with exporting and documents importing a standard shipment of goods by sea transport, and the number of documents necessary Inland transport and handling to complete the transaction. The indicators cover Customs clearance and inspections procedural requirements such as documentation Port and terminal handling requirements and procedures at customs and other regulatory agencies as well as at the port. They also Does not include sea transport time cover trade logistics, including the time and cost of inland transport to the largest business city. The Cost required to export and import (US$ per container) ranking on the ease of trading across borders is the simple average of the percentile rankings on its All documentation component indicators: documents, time and cost Inland transport and handling to export and import. Customs clearance and inspections To make the data comparable across economies, Port and terminal handling Doing Business uses several assumptions about the business and the traded goods. Official costs only, no bribes The business: • Do not require refrigeration or any other special environment. • Is of medium size and employs 60 people. • Do not require any special phytosanitary or • Is located in the periurban area of the environmental safety standards other than economy’s largest business city. accepted international standards. • Is a private, limited liability company, • Are one of the economy’s leading export or domestically owned, formally registered import products. and operating under commercial laws and regulations of the economy. • Are transported in a dry-cargo, 20-foot full container load. The traded goods: • Are not hazardous nor do they include military items. Doing Business 2014 ARAB WORLD 67 TRADING ACROSS BORDERS Where do the region’s economies stand today? How easy it is for businesses in economies in Arab across borders suggest an answer (figure 9.1). The World to export and import goods? The global average ranking of the region and comparator regions rankings of these economies on the ease of trading provide a useful benchmark. Figure 9.1 How economies in Arab World rank on the ease of trading across borders Source: Doing Business database. Doing Business 2014 ARAB WORLD 68 TRADING ACROSS BORDERS The indicators underlying the rankings may be more documents, the time and the cost (figure 9.2). revealing. Data collected by Doing Business show what Comparing these indicators across the region and with it takes to export or import a standard container of averages both for the region and for comparator goods in each economy in the region: the number of regions can provide useful insights. Figure 9.2 What it takes to trade across borders in economies in Arab World Documents to export (number) Doing Business 2014 ARAB WORLD 69 TRADING ACROSS BORDERS Time to export (days) Doing Business 2014 ARAB WORLD 70 TRADING ACROSS BORDERS Cost to export (US$ per container) Doing Business 2014 ARAB WORLD 71 TRADING ACROSS BORDERS Documents to import (number) Doing Business 2014 ARAB WORLD 72 TRADING ACROSS BORDERS Time to import (days) Doing Business 2014 ARAB WORLD 73 TRADING ACROSS BORDERS Cost to import (US$ per container) Source: Doing Business database. Doing Business 2014 ARAB WORLD 74 TRADING ACROSS BORDERS What are the changes over time? In economies around the world, trading across borders systems. These changes help improve their 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 tools to facilitate trade—including single windows, Business recorded in Arab World (table 9.1)? risk-based inspections and electronic data interchange Table 9.1 How have economies in Arab World made trading across borders easier—or not? By Doing Business report year DB year Economy Reform Algeria has made trading across borders more difficult by DB2008 Algeria increasing the amount of inspections carried out by authorities. Djibouti eased trading across borders by implementign an e- DB2008 Djibouti manifest system. DB2008 Egypt, Arab Rep. Egypt eased trade by improving Customs administration. Morocco eased trading across borders by introducing a risk- DB2008 Morocco based system for inspections. Saudi Arabia eased importing by abolishing the requirement for a consular certificate as well as allowing the transfer of data electronically thereby not requiring hard copies of DB2008 Saudi Arabia documents to be submitted. There has also been an improvement in the capacity of ports facilities, thus allowing the port of Jeddah to clear higher number of containers per day. Port administration improvements and abolishing of DB2009 Djibouti documents decreased export and import documentation, as well as import time. Egypt upgraded port facilities at Alexandria and speeded up DB2009 Egypt, Arab Rep. customs clearance and greater competition in the banking sector led to a reduction in the time to open a letter of credit. DB2009 Morocco Morocco abolished the container ID card thereby speeding Doing Business 2014 ARAB WORLD 75 DB year Economy Reform up the import and export process. The entry of private banks into the Syrian market sped up the DB2009 Syrian Arab Republic issuing of Letters of Credit. Tunisia required freight arriving at the port to be DB2009 Tunisia accompanied by a unit of the customs authority and thereby increased the time to import. The implementation of a risk-based inspections regime of post-destination clearance for pre-approved traders as well as a reduction of the number of containers subject to physicall DB2010 Jordan inspection to 30% as well as the full implementation of ASYCUDA WORLD, allowing online customs declaration submission, have reduced the clearance time by customs by 2 days for exporters and 3 days for importers. Improvement of the customs administrative procedures and DB2010 Kuwait training of human resources have helped reduce the time to clear goods in Kuwait. Sudan has sped up trading across borders with improved customs clearance and the electronic connection of 10 DB2010 Sudan customs offices with facilitation for traders to file their declaration remotely, and with the addition 2 new scanners at the Port of Sudan .nal. Through the expansion of the TradeNet electronic single window, Tunisian traders can quickly file all documents required to clear their cargo online. While this has decreased DB2010 Tunisia the delays of processing by 2 days, the requirement to still physically provide original documents obstruct on the greater impact the technological innovation could have. Trading across borders in Dubai, UAE has improved due to greater capacity at the container terminal, the elimination of DB2010 United Arab Emirates the terminal handling receipt as a necessary document, and increased trade finance products. DB2010 Yemen, Rep. The implementation of a risk-based inspection and the installation of an EDI system has reduced the time required to Doing Business 2014 ARAB WORLD 76 DB year Economy Reform clear goods at the customs Bahrain made it easier to trade by building a modern new DB2011 Bahrain port, improving the electronic data interchange system and introducing risk-based inspections. Egypt made trading easier by introducing an electronic DB2011 Egypt, Arab Rep. system for submitting export and import documents. Saudi Arabia reduced the time to import by launching a new DB2011 Saudi Arabia container terminal at the Jeddah Islamic Port. Tunisia upgraded its electronic data interchange system for DB2011 Tunisia imports and exports, speeding up the assembly of import documents. The United Arab Emirates streamlined document preparation DB2011 United Arab Emirates and reduced the time to trade with the launch of Dubai Customs’ comprehensive new customs system, Mirsal 2. More efficient processes at Palestinian customs made trading DB2011 West Bank and Gaza easier in the West Bank. Djibouti made trading across borders faster by developing a DB2012 Djibouti new container terminal. Jordan made trading across borders faster by introducing X- DB2012 Jordan ray scanners for risk management systems. Qatar reduced the time to export and import by introducing a DB2013 Qatar new online portal allowing electronic submission of customs declarations for clearance at the Doha seaport. Mauritania made trading across borders easier by introducing DB2014 Mauritania a new riskbased inspection system with scanners. 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 2014 ARAB WORLD 77 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 Procedures to enforce a contract through courts encourage new business relationships the courts (number) because businesses know they can rely on the courts if a new customer fails to pay. Speedy trials Steps to file and serve the case are essential for small enterprises, which may lack Steps for trial and judgment the resources to stay in business while awaiting the Steps to enforce the judgment outcome of a long court dispute. What do the indicators cover? Time required to complete procedures (calendar days) Doing Business measures the efficiency of the Time to file and serve the case judicial system in resolving a commercial dispute before local courts. Following the step-by-step Time for trial and obtaining judgment evolution of a standardized case study, it collects Time to enforce the judgment data relating to the time, cost and procedural complexity of resolving a commercial lawsuit. The Cost required to complete procedures (% of ranking on the ease of enforcing contracts is the claim) simple average of the percentile rankings on its Average attorney fees component indicators: procedures, time and cost. Court costs The dispute in the case study involves the breach Enforcement costs of a sales contract between 2 domestic businesses. The 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. • The dispute on the quality of the goods requires an expert opinion. • The buyer orders custom-made goods, then fails to pay. • The judge decides in favor of the seller; there is no appeal. • The seller sues the buyer before a competent court. • The seller enforces the judgment through a public sale of the buyer’s movable assets. • The value of the claim is 200% of income per capita. • The seller requests a pretrial attachment to secure the claim. Doing Business 2014 ARAB WORLD 78 ENFORCING CONTRACTS Where do the region’s economies stand today? How efficient is the process of resolving a commercial ease of enforcing contracts suggest an answer (figure dispute through the courts in economies in Arab 10.1). The average ranking of the region and World? The global rankings of these economies on the comparator regions provide a useful benchmark. Figure 10.1 How economies in Arab World rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2014 ARAB WORLD 79 ENFORCING CONTRACTS The indicators underlying the rankings may also be procedures, the time and the cost (figure 10.2). revealing. Data collected by Doing Business show what Comparing these indicators across the region and with it takes to enforce a contract through the courts in averages both for the region and for comparator each economy in the region: the number of regions can provide useful insights. Figure 10.2 What it takes to enforce a contract through the courts in economies in Arab World Procedures (number) Doing Business 2014 ARAB WORLD 80 ENFORCING CONTRACTS Time (days) Doing Business 2014 ARAB WORLD 81 ENFORCING CONTRACTS Cost (% of claim) Source: Doing Business database. Doing Business 2014 ARAB WORLD 82 ENFORCING CONTRACTS What are the changes over time? Economies in all regions have improved contract periodic reviews to clear inactive cases from the docket enforcement in recent years. A judiciary can be and by making procedures faster. What reforms improved in different ways. Higher-income economies making it easier (or more difficult) to enforce contracts tend to look for ways to enhance efficiency by has Doing Business recorded in Arab World (table introducing new technology. Lower-income economies 10.1)? often work on reducing backlogs by introducing Table 10.1 How have economies in Arab World made enforcing contracts easier—or not? By Doing Business report year DB year Economy Reform Mauritania increased the capacity of the courts by hiring new DB2008 Mauritania judges and updated the way that commercial courts function. DB2009 United Arab Emirates UAE introduced e-filing Algeria has improved contract enforcement with a new Code of Civil Procedure that reduces steps and time, and the courts DB2010 Algeria are now being fully computerized that includes setting up an electronic case register and case management software. Egypt eased the process of enforcing contracts by creating DB2010 Egypt, Arab Rep. commercial courts. Jordan has improved contract enforcement by setting up a specialized commercial court division and equipping its courts with a computer aided case-management system. DB2010 Jordan Further, a raise in threshold of the Conciliation Court (the lower Court) is expected to result in a better distribution of case load. In the West Bank and Gaza, contract enforcement has sped up as new judges have been trained, recruited and appointed. DB2010 West Bank and Gaza Courts now have an “enforcement judge” in charge solely of execution, and now possess computerized case management software. Saudi Arabia made enforcing contracts easier by expanding DB2013 Saudi Arabia the computerization of its courts and introducing an electronic filing system. 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 2014 ARAB WORLD 83 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 Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and 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 Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers’ fees proceedings of individuals and financial Assessors’ and auctioneers’ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Outcome well as public information on bankruptcy systems. Whether business continues operating as a The ranking on the ease of resolving insolvency is going concern or business assets are sold based on the recovery rate, which is recorded as piecemeal cents on the dollar recouped by creditors through reorganization, liquidation or debt enforcement Recovery rate for creditors (cents on the (foreclosure) proceedings. The recovery rate is a dollar) function of time, cost and other factors, such as Measures the cents on the dollar recovered lending rate and the likelihood of the company by creditors continuing to operate. Present value of debt recovered To make the data comparable across economies, Official costs of the insolvency proceedings Doing Business uses several assumptions about the are deducted business and the case. It assumes that the Depreciation of furniture is taken into company: account • Is a domestically owned, limited liability Outcome for the business (survival or not) company operating a hotel. affects the maximum value that can be recovered • Operates in the economy’s largest business city. • Has 201 employees, 1 main secured • Has a higher value as a going concern—and creditor and 50 unsecured creditors. that the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2014 ARAB WORLD 84 RESOLVING INSOLVENCY Where do the region’s economies stand today? How efficient are insolvency proceedings in economies benchmark for assessing the efficiency of insolvency in Arab World? The global rankings of these proceedings. Speed, low costs and continuation of economies on the ease of resolving insolvency suggest viable businesses characterize the top-performing an answer (figure 11.1). The average ranking of the economies. region and comparator regions provide a useful Figure 11.1 How economies in Arab World rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2014 ARAB WORLD 85 RESOLVING INSOLVENCY The indicators underlying the rankings may be more Comparing these indicators across the region and with revealing. Data collected by Doing Business show the averages both for the region and for comparator average time and cost required to resolve insolvency regions can provide useful insights. as well as the average recovery rate (figure 11.2). Figure 11.2 How efficient is the insolvency process in economies in Arab World Time (years) Doing Business 2014 ARAB WORLD 86 RESOLVING INSOLVENCY Cost (% of estate) Doing Business 2014 ARAB WORLD 87 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) * Indicates a “no practice” mark. See the data notes for details. Source: Doing Business database. Doing Business 2014 ARAB WORLD 88 RESOLVING INSOLVENCY What are the changes over time? 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 Arab World (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How have economies in Arab World made resolving insolvency easier—or not? By Doing Business report year DB year Economy Reform The Ministry of Commerce introduced strict deadlines for DB2009 Saudi Arabia bankruptcy procedures. Auctions of debtors’ assets now take place quicker than before. Kuwait introduced a new law that establishes a new legal DB2010 Kuwait procedure enabling companies in financial difficulties on the verge of insolvency to restructure. Saudi Arabia speeded up the insolvency process by providing DB2011 Saudi Arabia earlier access to amicable settlements and putting time limits on the settlements to encourage creditors to participate. Djibouti made resolving insolvency easier through its new commercial code, which allows an insolvent debtor to file for DB2014 Djibouti preventive settlement, legal redress or liquidation and sets out clear rules on the steps and procedures for each of the alternatives a 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 2014 ARAB WORLD 89 DATA NOTES The indicators presented and analyzed in Doing rounds of verification, leading to revisions or Business measure business regulation and the expansions of the information collected. protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of ECONOMY CHARACTERISTICS regulation, such as the number of procedures to start a business or to register and transfer commercial property. Second, they gauge the time and cost to Gross national income per capita achieve a regulatory goal or comply with regulation, such as the time and cost to enforce a contract, go Doing Business 2014 reports 2012 income per capita through bankruptcy or trade across borders. Third, as published in the World Bank’s World Development they measure the extent of legal protections of Indicators 2013. Income is calculated using the Atlas property, for example, the protections of investors method (current U.S. dollars). For cost indicators against looting by company directors or the range of expressed as a percentage of income per capita, assets that can be used as collateral according to 2012 gross national income (GNI) in U.S. dollars is secured transactions laws. Fourth, a set of indicators used as the denominator. GNI data were not documents the tax burden on businesses. Finally, a set available from the World Bank for Afghanistan, The of data covers different aspects of employment Bahamas, Bahrain, Barbados, Brunei Darussalam, regulation. The 11 sets of indicators measured in Djibouti, the Islamic Republic of Iran, Kuwait, Libya, Doing Business were added over time, and the sample Myanmar, New Zealand, Oman, San Marino, the of economies expanded. Syrian Arab Republic, West Bank and Gaza, and the Republic of Yemen. In these cases GDP or GNP per The data for all sets of indicators in Doing Business 2 capita data and growth rates from other sources, 2014 are for June 2013. such as the International Monetary Fund’s World Economic Outlook database and the Economist Intelligence Unit, were used. Methodology Region and income group The Doing Business data are collected in a standardized way. To start, the Doing Business team, Doing Business uses the World Bank regional and with academic advisers, designs a questionnaire. The income group classifications, available at questionnaire uses a simple business case to ensure http://data.worldbank.org/about/country- classifications. The World Bank does not assign comparability across economies and over time—with regional classifications to high-income economies. assumptions about the legal form of the business, its For the purpose of the Doing Business report, high- size, its location and the nature of its operations. income OECD economies are assigned the “regional” Questionnaires are administered to more than 10,200 classification OECD high income. Figures and tables local experts, including lawyers, business consultants, presenting regional averages include economies accountants, freight forwarders, government officials from all income groups (low, lower middle, upper and other professionals routinely administering or middle and high income). advising on legal and regulatory requirements (table Population 21.2). These experts have several rounds of interaction with the Doing Business team, involving conference Doing Business 2014 reports midyear 2012 calls, written correspondence and visits by the team. population statistics as published in World For Doing Business 2014 team members visited 33 Development Indicators 2013. economies to verify data and recruit respondents. The data from questionnaires are subjected to numerous The Doing Business methodology offers several advantages. It is transparent, using factual information 2 The data for paying taxes refer to January – December 2012. Doing Business 2014 ARAB WORLD 90 about what laws and regulations say and allowing reasons the time delays reported in Doing Business multiple interactions with local respondents to clarify 2014 would differ from the recollection of potential misinterpretations of questions. Having entrepreneurs reported in the World Bank Enterprise representative samples of respondents is not an issue; Surveys or other perception surveys. Doing Business is not a statistical survey, and the texts This year Doing Business completed subnational of the relevant laws and regulations are collected and studies in Colombia, Italy and the city of Hargeisa answers checked for accuracy. The methodology is (Somaliland) and is currently updating indicators in inexpensive and easily replicable, so data can be Egypt, Mexico and Nigeria. Doing Business also collected in a large sample of economies. Because published regional studies for the g7+ and the East standard assumptions are used in the data collection, African Community. The g7+ group is a country- comparisons and benchmarks are valid across owned and country-led global mechanism established economies. Finally, the data not only highlight the in April 2010 to monitor, report and draw attention to extent of specific regulatory obstacles to business but the unique challenges faced by fragile states. The also identify their source and point to what might be member countries included in the report are reformed. Information on the methodology for each Afghanistan, Burundi, the Central African Republic, Doing Business topic can be found on the Doing Chad, the Comoros, the Democratic Republic of Business website at Congo, Côte d’Ivoire, Guinea, Guinea-Bissau, Haiti, http://www.doingbusiness.org/methodology. Liberia, Papua New Guinea, Sierra Leone, the Solomon Islands, South Sudan, Timor-Leste and Togo. Limits to what is measured The subnational studies point to differences in business regulation and its implementation—as well as The Doing Business methodology has 5 limitations that in the pace of regulatory reform—across cities in the should be considered when interpreting the data. First, same economy. For several economies subnational the collected data refer to businesses in the economy’s studies are now periodically updated to measure largest business city (which in some economies differs change over time or to expand geographic coverage from the capital) and may not be representative of to additional cities. This year that is the case for all the regulation in other parts of the economy. To address subnational studies published. this limitation, subnational Doing Business indicators were created (box 21.1). Second, the data often focus on a specific business form—generally a limited Changes in what is measured liability company (or its legal equivalent) of a specified size—and may not be representative of the regulation The methodology for 2 indicator sets—trading across on other businesses, for example, sole proprietorships. borders and paying taxes—was updated this year. For Third, transactions described in a standardized case trading across borders, documents that are required scenario refer to a specific set of issues and may not purely for purposes of preferential treatment are no represent the full set of issues a business encounters. longer included in the list of documents (for example, Fourth, the measures of time involve an element of a certificate of origin if the use is only to qualify for a judgment by the expert respondents. When sources preferential tariff rate under trade agreements). For indicate different estimates, the time indicators paying taxes, the value of fuel taxes is no longer reported in Doing Business represent the median included in the total tax rate because of the difficulty values of several responses given under the of computing these taxes in a consistent way across all assumptions of the standardized case. economies covered. The fuel tax amounts are in most cases very small, and measuring these amounts is Finally, the methodology assumes that a business has often complicated because they depend on fuel full information on what is required and does not consumption. Fuel taxes continue to be counted in the waste time when completing procedures. In practice, number of payments. completing a procedure may take longer if the business lacks information or is unable to follow up In a change involving several indicator sets, the rule promptly. Alternatively, the business may choose to establishing that each procedure must take at least 1 disregard some burdensome procedures. For both day was removed for procedures that can be fully Doing Business 2014 ARAB WORLD 91 completed online in just a few hours. This change business and the distance to frontier measure. The affects the time indicator for starting a business, ease of doing business ranking compares economies dealing with construction permits and registering with one another, while the distance to frontier property. For procedures that can be fully completed measure benchmarks economies to the frontier in 3 online, the duration is now set at half a day rather than regulatory practice, measuring the absolute distance to a full day. the best performance on each indicator. Both measures can be used for comparisons over time. The threshold for the total tax rate introduced in 2011 When compared across years, the distance to frontier for the purpose of calculating the ranking on the ease measure shows how much the regulatory environment of paying taxes was updated. All economies with a for local entrepreneurs in each economy has changed total tax rate below the threshold (which is calculated over time in absolute terms, while the ease of doing and adjusted on a yearly basis) receive the same business ranking can show only relative change. ranking on the total tax rate indicator. The threshold is not based on any economic theory of an “optimal tax Ease of doing business rate” that minimizes distortions or maximizes efficiency The ease of doing business index ranks economies in the tax system of an economy overall. Instead, it is from 1 to 189. For each economy the ranking is mainly empirical in nature, set at the lower end of the calculated as the simple average of the percentile distribution of tax rates levied on medium-size rankings on each of the 10 topics included in the index enterprises in the manufacturing sector as observed in Doing Business 2014: starting a business, dealing through the paying taxes indicators. This reduces the with construction permits, getting electricity, bias in the indicators toward economies that do not registering property, getting credit, protecting need to levy significant taxes on companies like the investors, paying taxes, trading across borders, Doing Business standardized case study company enforcing contracts, and resolving insolvency. The because they raise public revenue in other ways—for employing workers indicators are not included in this example, through taxes on foreign companies, through year’s aggregate ease of doing business ranking. taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of Construction of the ease of doing business index the methodology). This year the threshold is 25,5%. Here is one example of how the ease of doing business index is constructed. In Denmark it takes 4 procedures, 5.5 days and 0.2% of annual income per capita in fees Data challenges and revisions to open a business. The minimum capital requirement Most laws and regulations underlying the Doing is 24% of annual income per capita. On these 4 Business data are available on the Doing Business indicators Denmark ranks in the 12th, 11th, 1st and website at http://www.doingbusiness.org. All the 79th percentiles. So on average Denmark ranks in the sample questionnaires and the details underlying the 25th percentile on the ease of starting a business. It indicators are also published on the website. Questions ranks in the 21st percentile on getting credit, 19th on the methodology and challenges to data can be percentile on paying taxes, 27th percentile on submitted through the website’s “Ask a Question” enforcing contracts, 5th percentile on resolving function at http://www.doingbusiness.org. insolvency and so on. Higher rankings indicate simpler regulation and stronger protection of property rights. Ease of doing business and distance to The simple average of Denmark’s percentile rankings frontier on all topics is 17th. When all economies are ordered Doing Business 2014 presents results for 2 aggregate by their average percentile rankings, Denmark stands measures: the aggregate ranking on the ease of doing at 5 in the aggregate ranking on the ease of doing business. 3 For getting electricity the rule that each procedure must take a minimum of 1 day still applies because in practice there are no More complex aggregation methods—such as cases in which procedures can be fully completed online in less than principal components and unobserved components— a day. For example, even though in some cases it is possible to yield a ranking nearly identical to the simple average apply for an electricity connection online, additional requirements mean that the process cannot be completed in less than 1 day. Doing Business 2014 ARAB WORLD 92 4 used by Doing Business. Thus, Doing Business uses 58 on enforcing contracts, 116 on dealing with the simplest method: weighting all topics equally and, construction permits and 145 on getting electricity. within each topic, giving equal weight to each of the Variation in performance across the indicator sets is topic components. not at all unusual. It reflects differences in the degree If an economy has no laws or regulations covering a of priority that government authorities give to specific area—for example, insolvency—it receives a particular areas of business regulation reform and the “no practice” mark. Similarly, an economy receives a ability of different government agencies to deliver “no practice” or “not possible” mark if regulation exists tangible results in their area of responsibility. but is never used in practice or if a competing Distance to frontier measure regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the A drawback of the ease of doing business ranking is ranking on the relevant indicator. that it can measure the regulatory performance of economies only relative to the performance of others. The ease of doing business index is limited in scope. It It does not provide information on how the absolute does not account for an economy’s proximity to large quality of the regulatory environment is improving markets, the quality of its infrastructure services (other over time. Nor does it provide information on how than services related to trading across borders and large the gaps are between economies at a single getting electricity), the strength of its financial system, point in time. the security of property from theft and looting, macroeconomic conditions or the strength of The distance to frontier measure is designed to underlying institutions. address both shortcomings, complementing the ease of doing business ranking. This measure illustrates the Variability of economies’ rankings across topics distance of an economy to the “frontier,” and the Each indicator set measures a different aspect of the change in the measure over time shows the extent to business regulatory environment. The rankings of an which the economy has closed this gap. The frontier is economy can vary, sometimes significantly, across a score derived from the most efficient practice or indicator sets. The average correlation coefficient highest score achieved on each of the component between the 10 indicator sets included in the indicators in 10 Doing Business indicator sets aggregate ranking is 0.38, and the coefficients (excluding the employing workers indicators) by any between any 2 sets of indicators range from 0.18 economy. In starting a business, for example, Canada (between getting electricity and getting credit) to 0.58 and New Zealand have achieved the highest (between trading across borders and resolving performance on the number of procedures required (1) insolvency and between trading across borders and and on the time (0.5 days), Denmark and Slovenia on getting electricity). These correlations suggest that the cost (0% of income per capita) and Chile, Zambia economies rarely score universally well or universally and 99 other economies on the paid-in minimum badly on the indicators. capital requirement (0% of income per capita) (table 22.2). Consider the example of Canada. It stands at 19 in the aggregate ranking on the ease of doing business. Its Calculating the distance to frontier for each economy ranking is 2 on starting a business, 4 on protecting involves 2 main steps. First, individual indicator scores investors, and 8 on paying taxes. But its ranking is only are normalized to a common unit: except for the total tax rate, each of the 31 component indicators y is rescaled to (max − y)/(max − min), with the minimum 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, “Doing Business Indicators: Why Aggregate, and How to value (min) representing the frontier—the highest Do It” (World Bank, Washington, DC, 2005). Principal components performance on that indicator across all economies and unobserved components methods yield a ranking nearly identical to that from the simple average method because both since 2003 or the first year the indicator was collected. 5 these methods assign roughly equal weights to the topics, since the For the total tax rate, consistent with the calculation of pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less 5 Even though scores for the distance to frontier are calculated from importance in the context of a specific economy. 2005, data from as early as 2003 are used to define the frontier Doing Business 2014 ARAB WORLD 93 the rankings, the frontier is defined as the total tax rate Economies that improved the most across 3 or at the 15th percentile of the overall distribution of more Doing Business topics in 2012/13 total tax rates for all years. Second, for each economy Doing Business 2014 uses a simple method to calculate the scores obtained for individual indicators are which economies improved the most in the ease of aggregated through simple averaging into one doing business. First, it selects the economies that in distance to frontier score, first for each topic and then 2012/13 implemented regulatory reforms making it across all topics. An economy’s distance to frontier is easier to do business in 3 or more of the 10 topics indicated on a scale from 0 to 100, where 0 represents included in this year’s ease of doing business ranking. 6 the lowest performance and 100 the frontier. Twenty-nine economies meet this criterion: Azerbaijan, The maximum (max) and minimum (min) observed Belarus, Burundi, Côte d’Ivoire, Croatia, Djibouti, values are computed for all economies included in the Gabon, Guatemala, Guinea, Italy, Kosovo, Latvia, the Doing Business sample since 2003 and for all years former Yugoslav Republic of Macedonia, Malaysia, (from 2003 to 2013). To mitigate the effects of extreme Mauritius, Mexico, Moldova, Mongolia, Morocco, outliers in the distributions of the rescaled data (very Panama, the Philippines, the Republic of Congo, few economies need 694 days to complete the Romania, the Russian Federation, Rwanda, Sri Lanka, procedures to start a business, but many need 9 days), Ukraine, Uzbekistan and the United Arab Emirates. th the maximum (max) is defined as the 95 percentile of Second, Doing Business sorts these economies on the the pooled data for all economies and all years for increase in their distance to frontier measure from the each indicator. The exceptions are the getting credit, previous year using comparable data. protecting investors and resolving insolvency Selecting the economies that implemented regulatory indicators, whose construction precludes outliers. In reforms in at least 3 topics and improved the most in addition, the cost to export and cost to import for each the distance to frontier measure is intended to year are divided by the GDP deflator, so as to take the highlight economies with ongoing, broadbased reform general price level into account when benchmarking programs. The criterion for identifying the top these absolute-cost indicators across economies with improvers was changed from last year. The different inflation trends. The base year for the deflator improvement in ease of doing business ranking is no is 2013 for all economies. longer used. The improvement in the distance to The difference between an economy’s distance to frontier measure is used instead because under this frontier score in any previous year and its score in measure economies are sorted according to their abs- 2013 illustrates the extent to which the economy has olute improvement instead of relative improvement. closed the gap to the frontier over time. And in any given year the score measures how far an economy is from the highest performance at that time. Take Colombia, which has a score of 70.5 on the distance to frontier measure for 2014. This score indicates that the economy is 29.5 percentage points away from the frontier constructed from the best performances across all economies and all years. Colombia was further from the frontier in 2009, with a score of 66.2. The difference between the scores shows an improvement over time. The distance to frontier measure can also be used for comparisons across economies in the same year, complementing the ease of doing business ranking. For example, Colombia stands at 63 this year in the ease of doing business ranking, while Peru, which is 6 Doing Business reforms making it more difficult to do business are 29.3 percentage points from the frontier, stands at 42. subtracted from the total number of those making it easier to do business. RESOURCES ON THE DOING BUSINESS WEBSITE Current features Business reforms News on the Doing Business project Short summaries of DB2014 business reforms, lists http://www.doingbusiness.org of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 189 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 189 economies—topic rankings, indicator values, lists of regulatory procedures and Law library details underlying indicators Online collection of business laws and regulations http://www.doingbusiness.org/data/ relating to business and gender issues http://www.doingbusiness.org/law-library/ Reports http://wbl.worldbank.org/ Access to Doing Business reports as well as subnational and regional reports, reform case Contributors studies and customized economy and regional More than 10,200 specialists in 189 economies profiles who participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers Entrepreneurship data underlying Doing Business Data on business density for 139 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics /entrepreneurship/ Research Abstracts of papers on Doing Business topics and Doing Business iPhone App related policy issues Doing Business at a Glance App presents the full http://www.doingbusiness.org/research/ report, rankings and highlights http://www.doingbusiness.org/specialfeatures/