DB13 Caribbean States
DB13 Caribbean States
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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. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions
This work is available under the Creative Commons Attribution 3.0 Unported license (CC BY 3.0) http://creativecommons.org/licenses/by/3.0. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: AttributionPlease cite the work as follows: World Bank. 2013. Doing Business 2013: 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 TranslationsIf 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: [email protected]. Additional copies of all 10 editions of Doing Business may be purchased at www.doingbusiness.org. Cover design: Corporate Visions, Inc.
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CONTENTS
Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 11 Dealing with construction permits ........................................................................................... 19 Getting electricity ....................................................................................................................... 25 Registering property .................................................................................................................. 31 Getting credit .............................................................................................................................. 38 Protecting investors ................................................................................................................... 42 Paying taxes ................................................................................................................................ 48 Trading across borders .............................................................................................................. 55 Enforcing contracts .................................................................................................................... 65 Resolving insolvency .................................................................................................................. 71 Data notes ................................................................................................................................... 77 Resources on the Doing Business website .............................................................................. 81
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INTRODUCTION
Doing Business sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations. It measures and tracks changes in regulations affecting 10 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. In a series of annual reports Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 185 economies, from Afghanistan to Zimbabwe, over time. The data set covers 46 economies in SubSaharan Africa, 33 in Latin America and the Caribbean, 24 in East Asia and the Pacific, 24 in Eastern Europe and Central Asia, 19 in the Middle East and North Africa and 8 in South Asia, as well as 31 OECD highincome economies. The indicators are used to analyze economic outcomes and identify what reforms have worked, where and why. This regional profile presents the Doing Business indicators for economies considered to be Caribbean states. It also shows the regional average, the best performance globally for each indicator and data for the following comparator regions: Common Market for Eastern and Southern Africa (COMESA), East Asia Pacific Islands, Southern African Development Community (SADC), Latin America and OECD high income. The data in this report are current as of June 1, 2012 (except for the paying taxes indicators, which cover the period JanuaryDecember 2011). The Doing Business methodology has limitations. Other areas important to businesssuch as an economys proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders and getting electricity), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutionsare not directly studied by Doing Business. The indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policy makers in designing regulatory reform. More information is available in the full report. Doing Business 2013 presents the indicators, analyzes their relationship with economic outcomes and recommends regulatory reforms. The data, along with information on ordering the Doing Business 2013 report, are available on the Doing Business website at http://www.doingbusiness.org.
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Figure 1.1 Where economies stand in the global ranking on the ease of doing business
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*The economy with the best performance globally is included as a benchmark. Source: Doing Business database.
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Table 1.1 Summary of Doing Business indicators for the Caribbean states
Indicator Starting a Business (rank) Procedures (number) Time (days) Cost (% of income per capita) Paid-in Min. Capital (% of income per capita) Dealing with Construction Permits (rank) Procedures (number) Time (days) Cost (% of income per capita) Getting Electricity (rank) Procedures (number) Time (days) Lowest regional performance 183 (Haiti) 12 (Haiti) 105 (Haiti) 286.6 (Haiti) 49.3 (Dominican Republic) 156 (Puerto Rico (U.S.) ) Best regional performance 12 (Puerto Rico (U.S.) ) 5 (Dominica)* 6 (Puerto Rico (U.S.) ) 0.7 (Trinidad and Tobago) 0.0 (11 Economies*) 5 (St. Vincent and the Grenadines) 7 (St. Lucia) 112 (St. Vincent and the Grenadines) 5.3 (Trinidad and Tobago) 11 (Trinidad and Tobago) 3 (St. Vincent and the Grenadines) 18 (St. Kitts and Nevis) Regional average 74 7 25 32.3 5.4 Best global performance 1 (New Zealand) 1 (New Zealand)* 1 (New Zealand) 0.0 (Slovenia) 0.0 (91 Economies*) 1 (Hong Kong SAR, China) 6 (Hong Kong SAR, China)* 26 (Singapore) 1.1 (Qatar) 1 (Iceland) 3 (Germany)* 17 (Germany)
58
18 (Puerto Rico (U.S.) ) 1,129 (Haiti) 692.0 (Haiti) 123 (Jamaica) 7 (Dominican Republic)* 96 (Jamaica)
11 259 112.8 53 5 55
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Indicator Cost (% of income per capita) Registering Property (rank) Procedures (number) Time (days) Cost (% of property value) Getting Credit (rank) Strength of legal rights index (0-10) Depth of credit information index (0-6) Public registry coverage (% of adults) Private bureau coverage (% of adults) Protecting Investors (rank) Extent of disclosure index (0-10) Extent of director liability index (0-10) Ease of shareholder suits index (0-10) Strength of investor protection index (0-10) Paying Taxes (rank) Payments (number per year) Time (hours per year) Trading Across Borders (rank) Documents to export
Lowest regional performance 4,599.0 (Haiti) 179 (Bahamas, The) 9 (Trinidad and Tobago)* 301 (Haiti) 13.5 (Bahamas, The) 159 (Haiti) 3 (Haiti)* 2 (Haiti) 0.7 (Haiti) 46.0 (Trinidad and Tobago) 169 (Haiti)* 2 (Haiti)* 1 (Barbados) 4 (Haiti)* 3.0 (Haiti)* 163 (Jamaica) 57 (Antigua and Barbuda) 368 (Jamaica) 149 (Haiti) 8 (Haiti)
Best regional performance 6.6 (Trinidad and Tobago) 105 (Jamaica) 5 (Dominica)* 17 (St. Lucia) 0.9 (Puerto Rico (U.S.) ) 12 (Puerto Rico (U.S.) ) 9 (Puerto Rico (U.S.) )* 6 (Dominican Republic) 44.1 (Dominican Republic) 81.5 (Puerto Rico (U.S.) ) 19 (Puerto Rico (U.S.) ) 7 (Puerto Rico (U.S.) ) 9 (Trinidad and Tobago) 8 (Puerto Rico (U.S.) ) 7.0 (Puerto Rico (U.S.) ) 43 (St. Lucia) 9 (Dominican Republic) 58 (Bahamas, The) 31 (Barbados) 5 (8 Economies*)
Regional average 599.6 139 7 92 8.5 92 7 4 22.4 62.5 67 4 6 6 5.6 100 32 190 81 6
Best global performance 0.0 (Japan) 1 (Georgia) 1 (Georgia)* 1 (Portugal) 0.0 (Belarus)* 1 (United Kingdom)* 10 (Malaysia)* 6 (United Kingdom)* 90.7 (Portugal) 100.0 (United Kingdom)* 1 (New Zealand) 10 (Hong Kong SAR, China)* 9 (Singapore)* 10 (New Zealand)* 9.7 (New Zealand) 1 (United Arab Emirates) 3 (Hong Kong SAR, China)* 12 (United Arab Emirates) 1 (Singapore) 2 (France)
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Indicator (number) Time to export (days) Cost to export (US$ per container) Documents to import (number) Time to import (days) Cost to import (US$ per container) Enforcing Contracts (rank) Time (days) Cost (% of claim) Procedures (number)
Regional average
33 (Haiti) 1,500 (Jamaica) 10 (Haiti)* 31 (Haiti) 2,675 (St. Lucia) 170 (Trinidad and Tobago) 1,340 (Trinidad and Tobago)* 45.6 (Jamaica) 49 (Bahamas, The)
8 (Dominican Republic) 805 (St. Kitts and Nevis) 5 (St. Vincent and the Grenadines) 8 (Barbados) 1,150 (Dominican Republic) 72 (Antigua and Barbuda) 351 (Antigua and Barbuda) 19.7 (Barbados) 34 (Dominican Republic)
5 (Singapore)* 435 (Malaysia) 2 (France) 4 (Singapore) 420 (Malaysia) 1 (Luxembourg) 150 (Singapore) 0.1 (Bhutan) 21 (Ireland)* 1 (Japan) 0.4 (Ireland) 1 (Singapore)* 92.8 (Japan)
Resolving Insolvency 185 (St. Kitts and Nevis)* 24 (Puerto Rico (U.S.) ) (rank) Time (years) Cost (% of estate) Recovery rate (cents on the dollar) 5.7 (Haiti) 38 (Dominican Republic) 0.0 (Grenada)* 1.1 (Jamaica) 4 (Bahamas, The) 73.4 (Puerto Rico (U.S.) )
Note: The ranking methodology for the paying taxes indicators changed in Doing Business 2013; see the data notes for details. * Two or more economies share the top ranking on this indicator. A number shown in place of an economys 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.
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STARTING A BUSINESS
Formal registration of companies has many immediate benefits for the companies and for business owners and employees. Legal entities outlive their founders. Resources are pooled as several shareholders join forces to start a company. Formally registered companies have access to services and institutions from courts to banks as well as to new markets. And their employees can benefit from protections provided by the law. An additional benefit comes with limited liability companies. These limit the financial liability of company owners to their investments, so personal assets of the owners are not put at risk. Where governments make this process easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and generating more revenue for the government. What do the indicators cover? Doing Business measures the ease of starting a business in an economy by recording all procedures officially required or commonly done in practice by an entrepreneur to start up and formally operate an industrial or commercial businessas well as the time and cost required to complete these procedures. It also records the paid-in minimum capital that companies must deposit before registration. The ranking on the ease of starting a business is the simple average of the percentile rankings on the 4 component indicators: procedures, time, cost and paid-in minimum capital requirement. To make the data comparable across economies, Doing Business uses several assumptions about the business and the procedures. It assumes that all information is readily available to the entrepreneur and that there has been no prior contact with officials. It also assumes that the entrepreneur will pay no bribes. And it assumes that the business: Is a limited liability company, located in the largest business city. Has between 10 and 50 employees. WHAT THE STARTING A BUSINESS INDICATORS MEASURE Procedures to legally start and operate a company (number) Preregistration (for example, name verification or reservation, notarization) Registration in the economys largest business city Postregistration (for example, social security registration, company seal) Time required to complete each procedure (calendar days) Does not include time spent gathering information Each procedure starts on a separate day Procedure completed once final document is received No prior contact with officials Cost required to complete each procedure (% of income per capita) Official costs only, no bribes No professional fees unless services required by law Paid-in minimum capital (% of income per capita) Deposited in a bank or with a notary before registration (or within 3 months) Conducts general commercial or industrial activities. Has a start-up capital of 10 times income per capita. Has a turnover of at least 100 times income per capita. Does not qualify for any special benefits. Does not own real estate. Is 100% domestically owned.
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Figure 2.1 How the Caribbean states rank on the ease of starting a business
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STARTING A BUSINESS
The indicators underlying the rankings may be more revealing. Data collected by Doing Business show what it takes to start a business in each economy in the region: the number of procedures, the time, the cost and the paid-in minimum capital requirement (figure 2.2). Comparing these indicators across the region and with averages both for the region and for comparator regions can provide useful insights.
Figure 2.2 What it takes to start a business in the Caribbean states Procedures (number)
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STARTING A BUSINESS
Time (days)
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STARTING A BUSINESS
Cost (% of income per capita)
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STARTING A BUSINESS
Paid-in minimum capital (% of income per capita)
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Table 2.1 How have the Caribbean states made starting a business easieror not? By Doing Business report year DB year DB2008 Economy Dominican Republic Reform The Dominican Republic shortened the time to register a company by simplifying the name registration process and introducing online tax registration. A virtual facility was established were registration formalities could be completed online, and tax cost was reduced substantially. St. Lucia eased up the business start- up process by making it possible to reserve and check availability of a company name on-line. St. Vincent and the Grenadines eased business start up process by abolishing the requirement to have a company rubber seal. The Dominican Republic made it more difficult to start a business by setting a minimum capital requirement of 100,000 Dominican pesos ($2,855) for its new type of company, sociedad de responsabilidad limitada (limited liability company). Grenada eased business start-up by transferring responsibility for the commercial registry from the courts to the civil administration. Haiti eased business start-up by eliminating the review by the presidents or the prime ministers office of the incorporation act submitted for publication. The Dominican Republic made starting a business easier by eliminating the requirement for a proof of deposit of capital when establishing a new company. Puerto Rico (territory of the United States) made starting a business easier by merging the name search and company registration procedures.
DB2009
Dominican Republic
DB2010
St. Lucia
DB2010
DB2011
Dominican Republic
DB2011
Grenada
DB2011
Haiti
DB2012
Dominican Republic
DB2012
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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.
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The warehouse: Is a new construction (there was no previous construction on the land). Has complete architectural and technical plans prepared by a licensed architect.
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DEALING WITH CONSTRUCTION PERMITS Where do the regions economies stand today?
How easy it is for entrepreneurs in the Caribbean states to legally build a warehouse? The global rankings of these economies on the ease of dealing with construction permits suggest an answer (figure 3.1). The average ranking of the region and comparator regions provide a useful benchmark.
Figure 3.1 How the Caribbean states rank on the ease of dealing with construction permits
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Figure 3.2 What it takes to comply with formalities to build a warehouse in the Caribbean states Procedures (number)
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* Indicates a no practice mark. See the data notes for details. Source: Doing Business database.
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DEALING WITH CONSTRUCTION PERMITS What are the changes over time?
Smart regulation ensures that standards are met while making compliance easy and accessible to all. Coherent and transparent rules, efficient processes and adequate allocation of resources are especially important in sectors where safety is at stake. Construction is one of them. In an effort to ensure building safety while keeping compliance costs reasonable, governments around the world have worked on consolidating permitting requirements. What construction permitting reforms has Doing Business recorded in the Caribbean states (table 3.1)?
Table 3.1 How have the Caribbean states made dealing with construction permits easieror not? By Doing Business report year DB year Economy Reform As part of an initiative to improve administrative efficiency, the Government introduced a statutory time limit for the issuance of building permits, reducing the time to build a warehouse by 80 days. Haiti made dealing with construction permits costlier by increasing the fees to obtain a building permit. Puerto Rico (territory of the United States) made dealing with construction permits easier by creating the Office of Permits Management to streamline procedures. Trinidad and Tobago made dealing with construction permits costlier by increasing the fees for building permit approvals.
DB2009
Jamaica
DB2012
Haiti
DB2012
DB2012
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.
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GETTING ELECTRICITY
Access to reliable and affordable electricity is vital for businesses. To counter weak electricity supply, many firms in developing economies have to rely on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for a customer is always to gain access by obtaining a connection. What do the indicators cover? Doing Business records all procedures required for a local business to obtain a permanent electricity connection and supply for a standardized warehouse, as well as the time and cost to complete them. These procedures include applications and contracts with electricity utilities, clearances from other agencies and the external and final connection works. The ranking on the ease of getting electricity is the simple average of the percentile rankings on its component indicators: procedures, time and cost. To make the data comparable across economies, several assumptions are used. The warehouse: Is located in the economys largest business city, in an area where other warehouses are located. Is not in a special economic zone where the connection would be eligible for subsidization or faster service. Has road access. The connection works involve the crossing of a road or roads but are carried out on public land. Is a new construction being connected to electricity for the first time. Has 2 stories, both above ground, with a total surface of about 1,300.6 square meters (14,000 square feet), and is built on a plot of 929 square meters (10,000 square feet). WHAT THE GETTING ELECTRICITY INDICATORS MEASURE Procedures to obtain an electricity connection (number) Submitting all relevant documents and obtaining all necessary clearances and permits Completing all required notifications and receiving all necessary inspections Obtaining external installation works and possibly purchasing material for these works Concluding any necessary supply contract and obtaining final supply Time required to complete each procedure (calendar days) Is at least 1 calendar day Each procedure starts on a separate day Does not include time spent gathering information Reflects the time spent in practice, with little follow-up and no prior contact with officials Cost required to complete each procedure (% of income per capita) Official costs only, no bribes Excludes value added tax
Is 150 meters long. Is to either the low-voltage or the mediumvoltage distribution network and either overhead or underground, whichever is more common in the economy and in the area where the warehouse is located. The length of any connection in the customers private domain is negligible. Involves installing one electricity meter. The monthly electricity consumption will be 0.07 gigawatt-hour (GWh). The internal electrical wiring has been completed.
The electricity connection: Is a 3-phase, 4-wire Y, 140-kilovolt-ampere (kVA) (subscribed capacity) connection.
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Figure 4.1 How the Caribbean states rank on the ease of getting electricity
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GETTING ELECTRICITY
The indicators underlying the rankings may be more revealing. Data collected by Doing Business show what it takes to get a new electricity connection in each economy in the region: the number of procedures, the time and the cost (figure 4.2). Comparing these indicators across the region and with averages both for the region and for comparator regions can provide useful insights.
Figure 4.2 What it takes to get an electricity connection in the Caribbean states Procedures (number)
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GETTING ELECTRICITY
Time (days)
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GETTING ELECTRICITY
Cost (% of income per capita)
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Table 4.1 How have the Caribbean states made getting electricity easieror not? By Doing Business report year DB year Economy Reform No reforms since DB2008 as measured by Doing Business.
Source: Doing Business database.
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REGISTERING PROPERTY
Ensuring formal property rights is fundamental. Effective administration of land is part of that. If formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly administered, it has little chance of being accepted as collateral for loanslimiting access to finance. What do the indicators cover? Doing Business records the full sequence of procedures necessary for a business to purchase property from another business and transfer the property title to the buyers name. The transaction is considered complete when it is opposable to third parties and when the buyer can use the property, use it as collateral for a bank loan or resell it. The ranking on the ease of registering property is the simple average of the percentile rankings on its component indicators: procedures, time and cost. To make the data comparable across economies, several assumptions about the parties to the transaction, the property and the procedures are used. The parties (buyer and seller): Are limited liability companies, 100% domestically and privately owned. Are located in the periurban area of the economys largest business city. Have 50 employees each, all of whom are nationals. Perform general commercial activities. WHAT THE REGISTERING PROPERTY INDICATORS MEASURE Procedures to legally transfer title on immovable property (number) Preregistration (for example, checking for liens, notarizing sales agreement, paying property transfer taxes) Registration in the economys largest business city Postregistration (for example, filing title with the municipality) Time required to complete each procedure (calendar days) Does not include time spent gathering information Each procedure starts on a separate day Procedure completed once final document is received No prior contact with officials Cost required to complete each procedure (% of property value) Official costs only, no bribes No value added or capital gains taxes included
Has no mortgages attached and has been under the same ownership for the past 10 years. Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story warehouse of 929 square meters (10,000 square feet). The warehouse is in good condition and complies with all safety standards, building codes and legal requirements. The property will be transferred in its entirety.
The property (fully owned by the seller): Has a value of 50 times income per capita. The sale price equals the value. Is registered in the land registry or cadastre, or both, and is free of title disputes. Is located in a periurban commercial zone, and no rezoning is required.
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Figure 5.1 How the Caribbean states rank on the ease of registering property
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REGISTERING PROPERTY
The indicators underlying the rankings may be more revealing. Data collected by Doing Business show what it takes to complete a property transfer in each economy in the region: the number of procedures, the time and the cost (figure 5.2). Comparing these indicators across the region and with averages both for the region and for comparator regions can provide useful insights.
Figure 5.2 What it takes to register property in the Caribbean states Procedures (number)
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REGISTERING PROPERTY
Time (days)
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REGISTERING PROPERTY
Cost (% of property value)
* Indicates a no practice mark. See the data notes for details. Source: Doing Business database.
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Table 5.1 How have the Caribbean states made registering property easieror not? By Doing Business report year DB year DB2008 Economy Dominican Republic Reform The Dominican Republic adopted several laws making registering property easier by streamlining its processes Haiti made registering a property simpler by streamlining the process at the tax authorities The Bahamas made transferring property faster by DB2009 Bahamas, The introducing a computerized system at the Registry of Records. The Dominican Republic adopted an efficient tax collection law to reduce and simplify the taxes collected by the tax DB2009 Dominican Republic authority in property transactions. As a result, taxes are reduced from around 4.3% of property value to a single 3% transfer tax. Jamaica reduced the property transfer tax from 7.5% to 6% of the property value and the stamp duty from 5.5% to 4.5% of DB2009 Jamaica property value. As a result, the cost to transfer a property in Jamaica has decreased from 13.51% to 11.02% of property value. (1) Budget law of 2008 reduced the real estate tax from 2.5% to 1.5%. (2) Budget law changed some depreciation rates: DB2010 Jamaica trucks is now 25% (used to be 33.3%), computers is now 50% (used to be 20%), office equipment is now 10% (used to be 20%), business development expenses is now 20% (used to be 50%).
DB2008
Haiti
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DB year
Economy
DB2011
clearance by the chief surveyor to avoid mischievous declarations. The appointment of a registrar focusing only on property cut
DB2011
Grenada
the time needed to transfer property in Grenada by almost half. Jamaica eased the transfer of property by lowering transfer
DB2011
Jamaica
taxes and fees, offering expedited registration procedures and making information from the company registrar available online.
DB2012
Bahamas, The
The Bahamas made transferring property more costly by increasing the applicable stamp duty fees. In Trinidad and Tobago property transfers became faster
DB2013
thanks to speedier issuance of clearance certificates by the Water and Sewerage Authority.
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.
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GETTING CREDIT
Two types of frameworks can facilitate access to credit and improve its allocation: credit information systems and the legal rights of borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders to view a potential borrowers financial history (positive or negative)valuable information to consider when assessing risk. And they permit borrowers to establish a good credit history that will allow easier access to credit. Sound collateral laws enable businesses to use their assets, especially movable property, as security to generate capitalwhile strong creditors rights have been associated with higher ratios of private sector credit to GDP. What do the indicators cover? Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit information index measures rules and practices affecting the coverage, scope and accessibility of credit information available through a public credit registry or a private credit bureau. The strength of 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 secured transactions system, involving a secured borrower and a secured lender and examining legal restrictions on the use of movable collateral. These scenarios assume that the borrower: Is a private, limited liability company. Has its headquarters and only base of operations in the largest business city. WHAT THE GETTING CREDIT INDICATORS MEASURE Strength of legal rights index (010) Protection of rights of borrowers and lenders through collateral laws Protection of secured creditors rights through bankruptcy laws Depth of credit information index (06) Scope and accessibility of credit information distributed by public credit registries and private credit bureaus Public credit registry coverage (% of adults) Number of individuals and firms listed in public credit registry as percentage of adult population Private credit bureau coverage (% of adults) Number of individuals and firms listed in largest private credit bureau as percentage of adult population
The ranking on the ease of getting credit is based on the percentile rankings on the sum of its component indicators: the depth of credit information index and the strength of legal rights index.
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Figure 6.1 How the Caribbean states rank on the ease of getting credit
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GETTING CREDIT
Another way to assess how well regulations and institutions support lending and borrowing in the region is to look at the distribution of its economies by their scores on the getting credit indicators. Figure 6.2 shows how many economies in the region received a Figure 6.2 How strong are legal rights for borrowers and lenders in the Caribbean states?
Number of economies in region with each score on strength of legal rights index (010)
particular score on the strength of legal rights index. Figure 6.3 shows the same thing for the depth of credit information index. Higher scores indicate stronger legal rights for borrowers and lenders and more credit information. Figure 6.3 How extensiveand how accessibleis credit information in the Caribbean states?
Number of economies in region with each score on depth of credit information index (06)
Note: Higher scores indicate that collateral and bankruptcy laws are better designed to facilitate access to credit. Source: Doing Business database.
Note: Higher scores indicate the availability of more credit information, from either a public credit registry or a private credit bureau, to facilitate lending decisions. Source: Doing Business database.
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Table 6.1 How have the Caribbean states made getting credit easieror not? By Doing Business report year DB year Economy Reform Utility companies are now included as providers of information to credit bureaus increasing the credit information index. Haiti strengthened access to credit with a new law that broadens the scope of assets that can be used as collateral, provides that future and after-acquired property may be used as collateral , and extends the security interest of the creditor automatically to the products, proceeds and replacements of the original asset.
DB2008
DB2010
Haiti
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.
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PROTECTING INVESTORS
Investor protections matter for the ability of companies to raise the capital they need to grow, innovate, diversify and compete. If the laws do not provide such protections, investors may be reluctant to invest unless they become the controlling shareholders. Strong regulations clearly define related-party transactions, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the company and set clear standards of accountability for company insiders. What do the indicators cover? Doing Business measures the strength of minority shareholder protections against directors use of corporate assets for personal gainor self-dealing. The indicators distinguish 3 dimensions of investor protections: transparency of related-party transactions (extent of disclosure index), liability for self-dealing (extent of director liability index) and shareholders ability to sue officers and directors for misconduct (ease of shareholder suits index). The ranking on the strength of investor protection index is the simple average of the percentile rankings on these 3 indices. To make the data comparable across economies, a case study uses several assumptions about the business and the transaction. The business (Buyer): Is a publicly traded corporation listed on the economys most important stock exchange (or at least a large private company with multiple shareholders). Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not specifically required by law. WHAT THE PROTECTING INVESTORS INDICATORS MEASURE Extent of disclosure index (010) Who can approve related-party transactions Requirements for external and internal disclosure in case of related-party transactions Extent of director liability index (010) Ability of shareholders to hold interested parties and members of the approving body liable in case of related-party transactions Available legal remedies (damages, repayment of profits, fines, imprisonment and rescission of the transaction) Ability of shareholders to sue directly or derivatively Ease of shareholder suits index (010) Documents and information available during trial Access to internal corporate documents (directly or through a government inspector) Strength of investor protection index (010) Simple average of the extent of disclosure, extent of director liability and ease of shareholder suits indices The price is higher than the going price for used trucks, but the transaction goes forward. All required approvals are obtained, and all required disclosures made, though the transaction is prejudicial to Buyer. Shareholders sue the interested parties and the members of the board of directors.
The transaction involves the following details: Mr. James, a director and the majority shareholder of the company, proposes that the company purchase used trucks from another company he owns.
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Figure 7.1 How the Caribbean states rank on the strength of investor protection index
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PROTECTING INVESTORS
But the overall ranking on the strength of investor protection index tells only part of the story. Economies may offer strong protections in some areas but not others. So the number of the Caribbean states that have a certain score recorded on the extent of disclosure, extent of director liability and ease of shareholder suits indices may also be revealing (figure 7.2). Higher scores indicate stronger investor protections. Comparing the scores across the region on the strength of investor protection index and with averages both for the region and for comparator regions can provide useful insights.
Figure 7.2 How strong are investor protections in the Caribbean states? Strength of investor protection index (010)
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PROTECTING INVESTORS
Extent of disclosure index (010)
Number of economies in region with each score on extent of disclosure index (010)
Note: Higher scores indicate greater disclosure. Source: Doing Business database.
Note: Higher scores indicate greater liability of directors. No economy receives a score of 10 on the extent of director liability index. Source: Doing Business database.
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PROTECTING INVESTORS
Ease of shareholder suits index (010)
Number of economies in region with each score on ease of shareholder suits index (010)
Note: Higher scores indicate greater powers of shareholders to challenge the transaction. Source: Doing Business database.
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Table 7.1 How have the Caribbean states strengthened investor protectionsor not? By Doing Business report year DB year Economy Reform The Dominican Republic adopted a new company law that strengthened investor protections by requiring greater corporate disclosure, director liability and shareholder access to information.
DB2010
Dominican Republic
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.
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PAYING TAXES
Taxes are essential. They fund the public amenities, infrastructure and services that are crucial for a properly functioning economy. But the level of tax rates needs to be carefully chosenand needless complexity in tax rules avoided. According to Doing Business data, in economies where it is more difficult and costly to pay taxes, larger shares of economic activity end up in the informal sector where businesses pay no taxes at all. What do the indicators cover? Using a case scenario, Doing Business measures the taxes and mandatory contributions that a medium-size company must pay in a given year as well as the administrative burden of paying taxes and contributions. This case scenario uses a set of financial statements and assumptions about transactions made over the year. Information is also compiled on the frequency of filing and payments as well as time taken to comply with tax laws. The ranking on the ease of paying taxes is the simple average of the percentile rankings on its component indicators: number of annual payments, time and total tax rate, with a threshold 1 being applied to the total tax rate. To make the data comparable across economies, several assumptions about the business and the taxes and contributions are used. TaxpayerCo is a medium-size business that started operations on January 1, 2010. The business starts from the same financial position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded. Taxes and mandatory contributions are measured at all levels of government. WHAT THE PAYING TAXES INDICATORS MEASURE Tax payments for a manufacturing company in 2011 (number per year adjusted for electronic or joint filing and payment) Total number of taxes and contributions paid, including consumption taxes (value added tax, sales tax or goods and service tax) Method and frequency of filing and payment Time required to comply with 3 major taxes (hours per year) Collecting information and computing the tax payable Completing tax return forms, filing with proper agencies Arranging payment or withholding Preparing separate tax accounting books, if required Total tax rate (% of profit) Profit or corporate income tax Social contributions and labor taxes paid by the employer Property and property transfer taxes Dividend, capital gains and financial transactions taxes Waste collection, vehicle, road and other taxes Taxes and mandatory contributions include corporate income tax, turnover tax and all labor taxes and contributions paid by the company. A range of standard deductions exemptions are also recorded. and
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 waysfor 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 years threshold is 25.7%.
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Figure 8.1 How the Caribbean states rank on the ease of paying taxes
Note: DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.7% applied in DB2013, the total tax rate is set at 25.7% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database.
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PAYING TAXES
The indicators underlying the rankings may be more revealing. Data collected by Doing Business show what it takes to comply with tax regulations in each economy in the regionthe number of payments per year and the time required to prepare and file taxes as well as the total tax rate (figure 8.2). Comparing these indicators across the region and with averages both for the region and for comparator regions can provide useful insights.
Figure 8.2 How easy is it to pay taxes in the Caribbean statesand what are the total tax rates? Payments (number per year)
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PAYING TAXES
Time (hours per year)
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PAYING TAXES
Total tax rate (% of profit)
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Table 8.1 How have the Caribbean states made paying taxes easieror not? By Doing Business report year DB year DB2008 Economy Dominican Republic Reform The Dominican Republic made it more costly for company to pay taxes by increasing the social security contribution rate. Puerto Rico introduced a sales and use tax.
DB2008
DB2008
Trinidad and Tobago reduced the tax burden for companies by reducing the CIT. Corporate income tax rate reduced from 30% to 25% from January 1, 2008. Effective July 17, 2007, corporate income tax rate was reduced from 29% to 25%. Several taxes abolished, including stamp
DB2009
DB2009
Dominican Republic
duty. online filing and payment which was piloted in 2006, was fully implemented in 2007 and most tax payers are using it. Effective year of income 2007, the corporate tax rate was reduced from 40% to 37.5% and will be progressively reduced to 30% over the next few years (35% in 2008). VAT
DB2009
will be introduced to replace a number of existing taxes, including consumption duty, domestic and international telecommunications surcharge, hotel tax, stamp duty on receipts and entertainment tax. VAT will be levied at a standard rate of 15%.
DB2010
St. Lucia
In 2008, time spent on tax compliance increased due to full implementation of new consumption tax legislation.
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DB year
Economy
Reform St. Vincent and the Grenadines has reduced the tax burden
DB2010
on business by lowering the top tax rate by 5% to 35%, and a further reduction to 32.5% from 2009 onwards. Puerto Rico made paying taxes more costly for business by
DB2011
introducing a special surtax of 5% on the tax liability in addition to the normal corporate income tax.
DB2012
St. Kitts and Nevis made paying taxes easier by introducing a value added tax. The Dominican Republic increased the corporate income tax rate. Jamaica made paying taxes easier for companies by allowing joint filing and payment of all social security contributions. Puerto Rico (territory of the United States) made paying taxes
DB2013
Dominican Republic
DB2013
Jamaica
DB2013
easier and less costly for companies by introducing a new Internal Revenue Code and tax codification and by reducing the effective corporate income tax rate.
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.
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Documents required to export and import (number) Bank documents Customs clearance documents Port and terminal handling documents Transport documents Time required to export and import (days) Obtaining, filling out and submitting all the documents Inland transport and handling Customs clearance and inspections Port and terminal handling Does not include sea transport time Cost required to export and import (US$ per container) All documentation Inland transport and handling Customs clearance and inspections Port and terminal handling Official costs only, no bribes Do not require refrigeration or any other special environment. Do not require any special phytosanitary or environmental safety standards other than accepted international standards. Are one of the economys leading export or import products. Are transported in a dry-cargo, 20-foot full container load.
The traded goods: Are not hazardous nor do they include military items.
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Figure 9.1 How the Caribbean states rank on the ease of trading across borders
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Figure 9.2 What it takes to trade across borders in the Caribbean states Documents to export (number)
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Table 9.1 How have the Caribbean states made trading across borders easieror not? By Doing Business report year DB year DB2008 Economy Dominican Republic Reform The Dominican Republic eased trading across borders by reducing documentation requirements. Improvements in the area of the online portal, risk-based DB2009 Dominican Republic inspections, and banking sector, led to a decrease in export and import time. DB2009 Haiti Risk-based inspections have reduced the time for export. Grenada has reduced the time for trading across borders with DB2010 Grenada ongoing Customs and Brokers training and implementation of electronic reference sources. With the implementation of the ASYCUDA system and 24DB2010 Haiti hour operation at the port, goods can be cleared faster in Haiti. DB2010 St. Kitts and Nevis St. Kitts and Nevis has improved trading times with the submission of the customs declaration electronically . Grenadas customs administration made trading faster by DB2011 Grenada simplifying procedures, reducing inspections, improving staff training and enhancing communication with users. Antigua and Barbuda made trading across borders more DB2013 Antigua and Barbuda difficult by increasing the number of documents required to import. DB2013 Dominica Dominica reduced the time to import by implementing the
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DB year
Economy
Reform ASYCUDA World electronic data interchange system. Grenada reduced the time to export and import by
DB2013
Grenada
DB2013
Jamaica
Jamaica reduced the time to import by introducing a night lodgment facility St. Kitts and Nevis made it more expensive to export by increasing the cost of operations at the port of Basseterre. Trinidad and Tobago reduced the time to export and import
DB2013
DB2013
by launching the ASYCUDA World electronic data interchange system and simplifying the process for obtaining a certificate of origin.
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.
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ENFORCING CONTRACTS
Well-functioning courts help businesses expand their network and markets. Without effective contract enforcement, people might well do business only with family, friends and others with whom they have established relationships. Where contract enforcement is efficient, firms are more likely to engage with new borrowers or customers, and they have greater access to credit. What do the indicators cover? Doing Business measures the efficiency of the judicial system in resolving a commercial dispute before local courts. Following the step-by-step evolution of a standardized case study, it collects data relating to the time, cost and procedural complexity of resolving a commercial lawsuit. The ranking on the ease of enforcing contracts is the simple average of the percentile rankings on its component indicators: procedures, time and cost. The dispute in the case study involves the breach 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 economys largest business city. The buyer orders custom-made goods, then fails to pay. The seller sues the buyer before a competent court. The value of the claim is 200% of income per capita. The seller requests a pretrial attachment to secure the claim. The dispute on the quality of the goods requires an expert opinion. The judge decides in favor of the seller; there is no appeal. The seller enforces the judgment through a public sale of the buyers movable assets. WHAT THE ENFORCING CONTRACTS INDICATORS MEASURE Procedures to enforce a contract through the courts (number) Any interaction between the parties in a commercial dispute, or between them and the judge or court officer Steps to file and serve the case Steps for trial and judgment Steps to enforce the judgment Time required to complete procedures (calendar days) Time to file and serve the case Time for trial and obtaining judgment Time to enforce the judgment Cost required to complete procedures (% of claim) No bribes Average attorney fees Court costs Enforcement costs
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Figure 10.1 How the Caribbean states rank on the ease of enforcing contracts
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ENFORCING CONTRACTS
The indicators underlying the rankings may also be revealing. Data collected by Doing Business show what it takes to enforce a contract through the courts in each economy in the region: the number of procedures, the time and the cost (figure 10.2). Comparing these indicators across the region and with averages both for the region and for comparator regions can provide useful insights.
Figure 10.2 What it takes to enforce a contract through the courts in the Caribbean states Procedures (number)
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ENFORCING CONTRACTS
Time (days)
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ENFORCING CONTRACTS
Cost (% of claim)
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Table 10.1 How have the Caribbean states made enforcing contracts easieror not? By Doing Business report year DB year DB2010 Economy Grenada Reform Additional staffing at the Grenada High Court has been decreasing the courts backlog and easing contract enforcement.
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.
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RESOLVING INSOLVENCY
A robust bankruptcy system functions as a filter, ensuring the survival of economically efficient companies and reallocating the resources of inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses to normal operation and increase returns to creditors. By improving the expectations of creditors and debtors about the outcome of insolvency proceedings, well-functioning insolvency systems can facilitate access to finance, save more viable businesses and thereby improve growth and sustainability in the economy overall. What do the indicators cover? Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic entities. It does not measure insolvency proceedings of individuals and financial institutions. The data are derived from survey responses by local insolvency practitioners and verified through a study of laws and regulations as well as public information on bankruptcy systems. The ranking on the ease of resolving insolvency is based on the recovery rate, which is recorded as cents on the dollar recouped by creditors through reorganization, liquidation or debt enforcement (foreclosure) proceedings. The recovery rate is a function of time, cost and other factors, such as lending rate and the likelihood of the company continuing to operate. To make the data comparable across economies, Doing Business uses several assumptions about the business and the case. It assumes that the company: Is a domestically owned, limited liability company operating a hotel. Operates in the economys largest business city. WHAT THE RESOLVING INSOLVENCY INDICATORS MEASURE Time required to recover debt (years) Measured in calendar years Appeals and requests for extension are included Cost required to recover debt (% of debtors estate) Measured as percentage of estate value Court fees Fees of insolvency administrators Lawyers fees Assessors and auctioneers fees Other related fees Recovery rate for creditors (cents on the dollar) Measures the cents on the dollar recovered by creditors Present value of debt recovered Official costs of the insolvency proceedings are deducted Depreciation of furniture is taken into account Outcome for the business (survival or not) affects the maximum value that can be recovered Has 201 employees, 1 main secured creditor and 50 unsecured creditors. Has a higher value as a going concern and that the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation.
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Figure 11.1 How the Caribbean states rank on the ease of resolving insolvency
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RESOLVING INSOLVENCY
The indicators underlying the rankings may be more revealing. Data collected by Doing Business show the average time and cost required to resolve insolvency as well as the average recovery rate (figure 11.2). Comparing these indicators across the region and with averages both for the region and for comparator regions can provide useful insights.
Figure 11.2 How efficient is the insolvency process in the Caribbean states Time (years)
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RESOLVING INSOLVENCY
Cost (% of estate)
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RESOLVING INSOLVENCY
Recovery rate (cents on the dollar)
* Indicates a no practice mark. See the data notes for details. Source: Doing Business database.
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Table 11.1 How have the Caribbean states made resolving insolvency easieror not? By Doing Business report year DB year DB2009 Economy St. Vincent and the Grenadines Reform St. Vincent and the Grenadines enacted a bankruptcy law in 2007. The law is the countrys first set of rules regulating bankruptcy of private enterprises since its colonial history.
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.
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DATA NOTES
The indicators presented and analyzed in Doing Business measure business regulation and the protection of property rightsand their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of 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 of achieving a regulatory goal or complying with regulation, such as the time and cost to enforce a contract, go through bankruptcy or trade across borders. Third, they measure the extent of legal protections of property, for example, the protections of investors against looting by company directors or the range of assets that can be used as collateral according to secured transactions laws. Fourth, a set of indicators documents the tax burden on businesses. Finally, a set of data covers different aspects of employment regulation. The data for all sets of indicators in Doing Business 2 2013 are for June 2012. ECONOMY CHARACTERISTICS
Gross national income per capita Doing Business 2013 reports 2011 income per capita as published in the World Banks World Development Indicators 2012. Income is calculated using the Atlas method (current US$). For cost indicators expressed as a percentage of income per capita, 2011 gross national income (GNI) in U.S. dollars is used as the denominator. GNI data were not available from the World Bank for Afghanistan; Australia; The Bahamas; Bahrain; Barbados; Brunei Darussalam; Cyprus; Djibouti; Guyana; the Islamic Republic of Iran; Kuwait; Malta; New Zealand; Oman; Puerto Rico (territory of the United States); Sudan; Suriname; the Syrian Arab Republic; Timor-Leste; West Bank and Gaza; and the Republic of Yemen. In these cases GDP or GNP per capita data and growth rates from the International Monetary Funds World Economic Outlook database and the Economist Intelligence Unit were used. Region and income group Doing Business uses the World Bank regional and income group classifications, available at http://data.worldbank.org/about/countryclassifications. The World Bank does not assign regional classifications to high-income economies. For the purpose of the Doing Business report, highincome OECD economies are assigned the regional classification OECD high income. Figures and tables presenting regional averages include economies from all income groups (low, lower middle, upper middle and high income). Population Doing Business 2013 reports midyear 2011 population statistics as published in World Development Indicators 2012. The Doing Business methodology offers several advantages. It is transparent, using factual information about what laws and regulations say and allowing multiple interactions with local respondents to clarify potential misinterpretations of questions. Having
Methodology
The Doing Business data are collected in a standardized way. To start, the Doing Business team, with academic advisers, designs a questionnaire. The questionnaire uses a simple business case to ensure comparability across economies and over timewith assumptions about the legal form of the business, its size, its location and the nature of its operations. Questionnaires are administered through more than 9,600 local experts, including lawyers, business consultants, accountants, freight forwarders, government officials and other professionals routinely administering or advising on legal and regulatory requirements. These experts have several rounds of interaction with the Doing Business team, involving conference calls, written correspondence and visits by the team. For Doing Business 2013 team members visited 24 economies to verify data and recruit respondents. The data from questionnaires are subjected to numerous rounds of verification, leading to revisions or expansions of the information collected.
2
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representative samples of respondents is not an issue; Doing Business is not a statistical survey, and the texts of the relevant laws and regulations are collected and answers checked for accuracy. The methodology is inexpensive and easily replicable, so data can be collected in a large sample of economies. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. Finally, the data not only highlight the extent of specific regulatory obstacles to business but also identify their source and point to what might be reformed. Information on the methodology for each Doing Business topic can be found on the Doing Business website at http://www.doingbusiness.org/methodology/.
2013 would differ from the recollection of entrepreneurs reported in the World Bank Enterprise Surveys or other perception surveys.
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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). Giving the same ranking to all economies whose total tax rate is below the threshold avoids awarding economies in the scoring for having an unusually low total tax rate, often for reasons unrelated to government policies toward enterprises. For example, economies that are very small or that are rich in natural resources do not need to levy broad-based taxes.
Construction of the ease of doing business index Here is one example of how the ease of doing business index is constructed. In Finland it takes 3 procedures, 14 days and 4% of annual income per capita in fees to register a property. On these 3 indicators Finland ranks in the 6th, 16th and 39th percentiles. So on average Finland ranks in the 20th percentile on the ease of registering property. It ranks in the 30th percentile on th starting a business, 28 percentile on getting credit, 24th percentile on paying taxes, 13th percentile on enforcing contracts, 5th percentile on trading across borders and so on. Higher rankings indicate simpler regulation and stronger protection of property rights. The simple average of Finlands percentile rankings on all topics is 21st. When all economies are ordered by their average percentile rankings, Finland stands at 11 in the aggregate ranking on the ease of doing business. More complex aggregation methodssuch as principal components and unobserved components yield a ranking nearly identical to the simple average 4 used by Doing Business. Thus, Doing Business uses the simplest method: weighting all topics equally and, within each topic, giving equal weight to each of the 5 topic components. If an economy has no laws or regulations covering a specific areafor example, insolvencyit receives a no practice mark. Similarly, an economy receives a no practice or not possible mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a no practice mark puts the economy at the bottom of the ranking on the relevant indicator.
In case of revisions to the methodology or corrections to the underlying data, the data are back-calculated to provide a comparable time series since the year the relevant economy or topic was first included in the data set. The time series is available on the Doing Business website (http://www.doingbusiness.org). Six topics and more than 50 economies have been added since the inception
3
of the project. Earlier rankings on the ease of doing business are therefore not comparable. 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, Doing Business Indicators: Why Aggregate, and How to Do It (World Bank, Washington, DC, 2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the 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 importance in the context of a specific economy. 5 A technical note on the different aggregation and weighting methods is available on the Doing Business website (http://www.doingbusiness.org).
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The ease of doing business index is limited in scope. It does not account for an economys proximity to large markets, the quality of its infrastructure services (other than services related to trading across borders and getting electricity), the strength of its financial system, the security of property from theft and looting, macroeconomic conditions or the strength of underlying institutions. Variability of economies rankings across topics Each indicator set measures a different aspect of the business regulatory environment. The rankings of an economy can vary, sometimes significantly, across indicator sets. The average correlation coefficient between the 10 indicator sets included in the aggregate ranking is 0.37, and the coefficients between any 2 sets of indicators range from 0.19 (between dealing with construction permits and getting credit) to 0.60 (between starting a business and protecting investors). These correlations suggest that economies rarely score universally well or universally badly on the indicators. Consider the example of Canada. It stands at 17 in the aggregate ranking on the ease of doing business. Its ranking is 3 on starting a business, and 4 on both resolving insolvency and protecting investors. But its ranking is only 62 on enforcing contracts, 69 on dealing with construction permits and 152 on getting electricity. Variation in performance across the indicator sets is not at all unusual. It reflects differences in the degree of priority that government authorities give to particular areas of business regulation reform and the ability of different government agencies to deliver tangible results in their area of responsibility.
Economies that improved the most across 3 or more Doing Business topics in 2011/12 Doing Business 2013 uses a simple method to calculate which economies improved the most in the ease of doing business. First, it selects the economies that in 2011/12 implemented regulatory reforms making it easier to do business in 3 or more of the 10 topics 6 included in this years ease of doing business ran king. Twenty-three economies meet this criterion: Benin, Burundi, Costa Rica, the Czech Republic, Georgia, Greece, Guinea, Kazakhstan, Korea, the Lao Peoples Democratic Republic, Liberia, Mongolia, the Netherlands, Panama, Poland, Portugal, Serbia, the Slovak Republic, Slovenia, Sri Lanka, Ukraine, the United Arab Emirates and Uzbekistan. Second, Doing Business ranks these economies on the increase in their ranking on the ease of doing business from the previous year using comparable rankings. Selecting the economies that implemented regulatory reforms in at least 3 topics and improved the most in the aggregate ranking is intended to highlight economies with ongoing, broad-based reform programs.
Doing Business reforms making it more difficult to do business are subtracted from the total number of those making it easier to do business.
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