Sarajevo October 20 th, 2011 Doing Business in Bosnia and Herzegovina Iva Hamel Private Sector Development Specialist, Indicator Based Reform Advisory, World Bank-IFC

What does Doing Business measure? Doing Business indicators: Focus on regulations relevant to the life cycle of a small to medium-sized domestic business. Are built on standardized case scenarios. Are measured for the most populous city in each country. Are focused on the formal sector. DO NOT measure all aspects of the business environment such as macroeconomic stability, corruption, level of labor skills, proximity to markets, or of regulation specific to foreign investment or financial markets. 2

Doing Business indicators – 11 areas of business regulation (9 included in the DB2011 ranking; 10 in DB2012)

What's new in Doing Business 2012? economies economies economies economies economies economies  Starting a business  Dealing with construction permits  Employing workers  Registering property  Getting credit  Protecting investors  Paying taxes  Trading across borders  Enforcing contracts  Resolving Insolvency (formerly Closing a business)  Update of 2007  Add 3 countries  Reformer’s Club, and 16 case studies  New “About DB” chapter  Trends analysis DB04-DB09  Most popular reforms  Most effective reforms  Lessons learned  Add 3 new countries (Bahamas, Bahrain, Qatar)  Methodology change in Getting Credit (Legal Rights)  Business regulation and reform in the context of the global crisis  EWI and social protection  Worker Protection: Researching ILO core labor standards  Piloting a new infrastructure indicator  Add Cyprus, Kosovo  New metric on 5- year change at country level  Focus on reform results  Getting Electricity: added 36 countries and indicator level ranking  Methodology review for Employing Workers indicator  Getting Electricity included in overall ranking  New metric on an economy’s distance to the frontier  New metric on an economy’s dispersion across indicators  Access to information data  4 case studies on regulatory reform  E-chapters for indicators  Threshold applied to the TTR in Paying Taxes

1. Singapore16. Georgia 2. Hong Kong SAR, China17. Thailand 3. New Zealand18. Malaysia 4. United States19. Germany 5. Denmark20. Japan 6. Norway21. Latvia 7. United Kingdom22. Macedonia, FYR 8. Korea, Rep.23. Mauritius 9. Iceland24. Estonia 10. Ireland25. Taiwan, China 11. Finland26. Switzerland 12. Saudi Arabia27. Lithuania 13. Canada28. Belgium 14. Sweden29. France 15. Australia30. Portugal Top 30 economies for the ease of doing business in 2010/11 5

Change in ranking DB11 to DB12 Starting a Business Dealing with construction permits Getting electricity Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Resolving insolvency Morocco 115  94 (-21) √ √√ Moldova 99  81 (-18) √ √ √√ Macedonia, FYR 34  22 (-12) √ √√ √ São Tomé and Principe 174  163 (-11)√√ √ √ Latvia 31  21 (-10) √ √√ √ Cape Verde 129  119 (-10) √√ √ Sierra Leone 150  141 (-9) √ √√√ Burundi 177  169 (-8) √ √√ √ Solomon islands 81  74 (-7) √ √ √ √ Korea, Rep. 15  8 (-7) √ √ √ Armenia 61  55 (-6) √√ √ √ √ Colombia 47  42 (-5) √ √ √ 12 economies improving the most in the ease of doing business in 2010/11

- For 9 consecutive years, ECA has been the world’s most active region in improving business regulation for domestic firms. 21 out of 24 economies implemented 53 institutional and regulatory reforms Eastern Europe and Central Asia (ECA) made the greatest strides in making business easier

Eastern Europe and Central Asia rankings on the ease of Doing Business 2010/11

Eastern Europe and Central Asia economies score high in many areas of business regulation IndicatorWorld’s top rankedECA’s top ranked Bosnia and Herzergovina Starting a business New ZealandMacedonia, FYR (6) 162 Dealing with construction permits Hong Kong SAR, China Georgia (4) 163 Registering property Saudi ArabiaGeorgia (1) 100 Getting credit MalaysiaLatvia (4) 67 Protecting investors New ZealandKazakhstan (10) 97 Paying taxes MaldivesKazakhstan (13) 110 Trading across borders SingaporeLatvia (15) 108 Enforcing contracts Luxembourg Russian Federation (13) 125 Resolving Insolvency JapanCyprus (23) 80 Getting Electricity IcelandSlovenia (27) 157

Bosnia and Herzegovina has reformed in 8 out of 10 areas of business regulation since DB 2005 DB Report Year Starting a business Dealing with construction permits Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Resolving Insolvency Getting Electricity Bosnia and Herzegovina has reformed its business environment in at least one area every year The pace of reforms was strongest in DB05 and DB09

1) Application for utilization permit to the canton ministry of commerce: from 15 to 1 days ✔ Bosnia and Herzegovina made starting a business easier by replacing the required utilization permit with a simple notification of commencement of activities and by streamlining the process for obtaining a tax identification number. These reforms reduced the process by 24 days. 2) Apply for company identification number with the competent tax office: from 15 to 5 days Bosnia and Herzegovina made great progress in reforming the process of starting a business

Bosnia and Herzegovina simplified the process of dealing with construction permits ✔ Dealing with construction permits The Land Administration Project, which began in 2006, was completed in early The main goal of the project was to provide business community and citizens with a prompt access to property and ownership related data. As a result, land registry and cadastre in Sarajevo have been fully digitalized. This measure allows the Cadastre and Land Registry to check land related information much faster. Procedure to register the building into cadastre books at the municipal Cadastre Department was reduced from 89 to 15 days.

Sustaining the pace of reforms: Starting a business Eliminate minimum capital requirement Make use of notaries optional Eliminate the requirement to obtain a resolution on intended activities from the Municipality Eliminate the requirement to buy a company stamp Shift company registration from courts to a separate agency Consolidate government approvals at one access point

Sustaining the pace of reforms: Dealing with Construction Permits Consolidate issuance of pre-construction clearances by the utility providers Eliminate the requirement for Municipality to mark the land plot before construction Issue the certificate of completion of construction with the final inspection Reduce costs of compliance with building permit regulations Computerize the application process Consolidate the building permit approval process.

Findings from recent research on regulatory reform impact: business entry and collateral laws Secured transactions and collateral regimes:  Predictable priority system for creditors in cases of default: credit as percentage of GDP is 60% (compared to 30% where no predictability)  Borrowers with collateral have 50% lower interest rates DB’s unique global dataset enables empirical research on business regulation and private and financial sector development (>650 articles in peer-reviewed journals). Business regulation reforms in business start up…. ReformResearch finding One stop shop for business registration in Mexico 5% increase in registered firms, 2.8% rise in employment (Bruhn, 2009) One stop shop in Colombia5.2% increase in firms registered (Cardenas and Rozo, 2009) Reduction of entry procedures in India6% increase in firms registered (Aghion, 2006) One stop shop in Portugal17% increase in firms registered (Branstetter et al, 2010) Combined reforms: Entry reforms in Indian states with more flexible labor regulations 17.8% increase in output gains, larger than in states with less flexible regulations (Sharma, 2009)

World Economic Forum Competitiveness Index and Doing Business

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