Starting a business in Madagascar Indonesia Sylvia Solf Justin Yap 7 November 2007

Doing Business Indicators Starting a business Dealing with licenses Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a business Update of 2007 Add 3 countries Reformer’s Club: 11 case studies Add Not paying bribes Add Using infrastructure Research program on regulation and business opportunities for women 178 Countries

Doing Business basic methodology: Time and motion study 1. Obtain the standard form of the company deed 2. Notarize deeds 3. Certificate of domicile 4. Obtain NWPW number (taxes) 5. Deposit capital in a bank 6. Pay registration fee at Treasury 7. Register at Ministry of Justice 8. Register with the Company Register 9. Apply for publication 10. Apply for trade license 11. Registration of manpower 12. Social security Cost (right axis) Time (left axis) Cost (% of GNI per capita) Time (number of days) % 10% 20% 30% 40% 50% % 70% 80% 90% List of procedures Starting a business in Indonesia

Tracking reform: Easier property transfer in Ghana Time reduced from 169 to 34 days Procedures Preparation of the transfer document Assessment and payment of stamp duty Submit application for Title Certificate Publication of transaction Issuance of Title Certificate Time (days) Procedure eliminated: Registration of deed and land commission

Top 30 on the Ease of Doing Business — Singapore 16. Switzerland 2. New Zealand17. Estonia 3. United States18. Georgia 4. Hong Kong, China 19. Belgium 5. Denmark20. Germany 6. United Kingdom21. Netherlands 7. Canada22. Latvia 8. Ireland23. Saudi Arabia 9. Australia 24. Malaysia 10. Iceland25. Austria 11. Norway26. Lithuania 12. Japan 27. Mauritius 13. Finland28. Puerto Rico 14. Sweden29. Israel 15. Thailand 30. Korea

Top Reformers in Egypt 2. Croatia 3. Ghana 4. Macedonia FYR 5. Georgia 6. Colombia 7. Saudi Arabia 8. Kenya 9. China 10. Bulgaria Starting a business Dealing with licenses Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a business

Eastern European and OECD countries reform steadily Countries with at least one positive reform in (%) E. Europe + Central Asia 78.6% 62.5% South Asia OECD 62.5% Middle East + N. Africa Sub-Saharan Africa East Asia + Pacific Latin America + Caribbean 35.5% 58.8% 52.2% 45.8%

Eastern Europe surpasses East Asia on the ease of doing business Average rank, ease of doing business High income OECD Latin America & Caribbean East Asia & Pacific Middle East & North Africa Eastern Europe & Central Asia South AsiaSub Saharan Africa

Indonesia in the region Singapore1 Hong Kong, China4 Japan12 Thailand15 Malaysia24 Korea30 Brunei78 China83 Vietnam91 Indonesia123 Philippines133 Cambodia145 Lao PDR164 Timor-Leste168

How Indonesia ranks in each indicator TopicIndonesia’s RankWorld’s highest ranked Starting a business 168Australia Dealing with licenses99 St. Vincent & the Grenadines Employing workers153United States Registering property121New Zealand Getting credit68United Kingdom Protecting investors51New Zealand Paying taxes110Maldives Trading across borders41Singapore Enforcing contracts141Hong Kong, China Closing a business136Japan

Ease of trading across borders in Indonesia compared to region

Indonesia’s reforms improved ease of doing business in 3 areas 1. China 2. Fiji 3. Indonesia 4. Lao PDR 5. Malaysia 6. Micronesi a 7. Mongolia 8. Thailand 9. Timor Leste 10. Tonga 11. Vanuatu 12. Vietnam Starting a business x Dealing with licenses Employing workers Registering property x Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a business

Shorter licensing times New regulation specifically revoked provisions on time period to complete building permits and special permits/building statement 28 Days After reform: 21 days Before reform: 49 days Time to obtain a building permit  cut by more than half

Easier access to credit Countries that expanded scope of information covered by credit registries or bureaus China France Georgia Honduras India Indonesia Kenya Kuwait Pakistan Saudi Arabia Trinidad and Tobago Tunisia West Bank and Gaza ZERO Minimum loan amount lowered in the public credit registry lowered from 50 million rupiah to ZERO

Stronger investor protections Indonesia deepened corporate disclosure requirements Indonesia Hong Kong Disclosure Index Director Liability Index Shareholder Suits Index Total Investor Protection Index

IndonesiaRegional averageOECD average Time and cost to start a business Time in days Cost as % of GNI per capita Opportunities for reform: simplifying business start-up

Reducing cost to transfer property Cost to register property (% of value)

How to jump 41 places by reforming in 3 areas Starting a business (rank: 168) Eliminate minimum capital requirement Make notary involvment optional Consolidate government approvals at one-stop shop New global rank: 61 Registering property (rank: 121) Introduce low flat registration fee New global rank: 52 Getting credit (rank: 68) Grant borrowers access to their credit information Collect and distribute information from retailers, trade creditors & utilities New global rank: 42 Indonesia’s New Overall Rank: 82

Why does it matter? Business Friendly Regulation Leads to More Registered Businesses and Start-ups Countries ranked by ease of doing business, quintiles Business Density (registered firms per capita) Business Entry (new firms in % of registered firms) Source: Doing Business database Easiest Most difficult Easiest

…Which Means more Formal Employment Source: Doing Business database, WDI Informal Sector (% of GDP) Unemployment (% of labor force) Easiest Most difficult Easiest Countries ranked by ease of doing business, quintiles

More Reforms, Higher Equity Returns 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% year Shareholder Returns Venezuela Egypt Colombia Sri Lanka India Brazil Poland Number of reforms,

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