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© 2008 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, D.C. 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] All rights reserved. 1 2 3 4 5 09 08 07 06 A copublication of the World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank Group encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. 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Contents Doing Business in South East Europe 2008 is the first Overview 1 regional and subnational Doing Business report in South East Europe. The report covers 22 cities from South Starting a business 5 East Europe which can be compared against each other, and with 178 economies around the world. The data Dealing with licenses 8 for South East European cities are for January 2008. Registering property 12 Comparisons with other cities, regions and countries in Enforcing contracts 16 the world are based on the data and indicators in Doing Business 2008. Data notes 19 Doing Business measures the ways in which govern- Doing Business indicators 25 ment regulations enhance business activity or restrain List of procedures it. This report covers fourDoing Business topics at the subnational and regional level: starting a business, deal- Starting a business 29 ing with licenses, registering property and enforcing Dealing with licenses 44 contracts. These indicators have been selected because Registering property 64 they cover areas of municipal jurisdiction and/or en- forcement. The indicators are used to analyze the eco- Acknowledgments 74 nomic outcomes of the regulations and to identify what reforms have worked, where and why. The methodology has limitations. Other areas im- portant to business—such as proximity to major mar- kets, the quality of infrastructure services (other than those related to trading across borders), the security of property from theft and looting, the transparency of investment climate advisory service of the World Bank government procurement, macroeconomic conditions Group. It was produced with the financial support of the or the underlying strength of institutions—are not stud- International Finance Corporation (IFC), United States ied directly by Doing Business. To make the data compa- Agency for International Development (USAID), and rable across countries, the indicators refer to a specific the Government of Switzerland through the State Secre- type of business—generally a limited liability company. tariat for Economic Affairs (SECO). The report was directed by FIAS, a multi-donor 1 TABLE 1.1 Doing Business in South East Europe—where is it easiest? Overview City City RANK Economy RANK Economy 1 Bitola (easiest) 12 Pristina Macedonia, FYR Kosovo 2 Zrenjanin 13 Belgrade Serbia Serbia 3 Shkodra 14 Vranje Albania Serbia 4 Pljevlje 15 Varazdin Montenegro Croatia 5 Krusevac 16 Sibenik Serbia Croatia An entrepreneur starting a business in Vlora (Albania) would 6 Vlora 17 Niksic only need 7 days to register her business, the same as in Albania Montenegro Paris (France) or Lisbon (Portugal).1 In Mostar (Bosnia and 7 Osijek 18 Podgorica Croatia Montenegro Herzegovina), it would take almost 9 times longer, similar to 8 Prizren 19 Zagreb Ljubljana (Slovenia) and Mbabane (Swaziland). Construction Kosovo Croatia licenses are costly throughout the South East Europe region, 9 Skopje 20 Banja Luka but Tirana (Albania) is least expensive at 461% of income per Macedonia, FYR Bosnia and Herzegovina 10 Uzice 21 Sarajevo capita. Enforcing a contract related to a simple commercial Serbia Bosnia and Herzegovina dispute takes about 10 months in Zrenjanin (Serbia) and 11 Tirana 22 Mostar more than 4 years in Banja Luka (Bosnia and Herzegovina). Albania Bosnia and Herzegovina Doing Business in South East Europe 2008 compares 22 Source: Doing Business database cities in 7 economies: Albania, Bosnia and Herzegovina, Cro- atia, Kosovo2, Macedonia, FYR (former Yugoslav Republic), pension and health services registration online. Two proce- Montenegro, and Serbia. Studying these economies in depth dures and 5 days were cut from the process. In the area of is driven by the common vision of the region—improving the construction licenses, Croatia decentralized its licensing pro- business environment to increase investment flows, enhanc- cess. A new law on zoning and construction came into force ing regional cooperation and eventually integrating with the on October 1, 2007. Reforms in credit and bankruptcy, which European Union (EU). are outside the scope of this report, were also introduced. The report covers 4Doing Business topics: starting a Macedonia, FYR, another global top reformer in 2008, business, dealing with licenses, registering property and decreased the time to obtain a construction license through enforcing contracts. These indicators have been selected administrative reform of the real estate registry and introduc- because they reveal differences in national and municipal tion of statutory time limits for issuing licenses. Macedonia, regulatory policies and practices—some regulations are FYR also eliminated the minimum capital requirement, mandated and enforced at the national level, while others introduced a one-stop shop, and is working on an online are administered locally. These differences allow for com- FIGURE 1.1 parisons within a country, the region and the world and are Eastern Europe & Central Asia reformed the most strong drivers of reform. Countries that made at least one positive reform in 2006/07 (%) Overall, doing business is easiest in Bitola (Macedonia, Eastern Europe FYR) and most difficult in Mostar (Bosnia and Herzegovina) & Central Asia 79 (table 1.1). South Asia 63 Most of the economies in South East Europe are reform- OECD ing rapidly to improve the ease of doing business. This fits high income 63 the trend observed in Eastern Europe and Central Asia as the Middle East & North Africa 59 region that reformed the most in 2006/07 (figure 1.1). Sub-Saharan Croatia and Macedonia, FYR are among the global Africa 52 East Asia top-10 reformers in Doing Business 2008 (table 1.2). This is no & Pacific 46 accident. Croatia reformed in 4 of the 10 Doing Business areas. Latin America 36 In 2005, registering a property in Croatia took 956 days. Now & Caribbean it takes 174 days. Croatia also sped up company start-up, consolidating procedures at the one-stop shop and allowing Source: Doing Business database. 2 DOING BUSINESS IN SOUTH EAST EUROPE 2008 TABLE 1.2 The top 10 reformers in 2006/07 Starting Dealing with Employing Registering Getting Protecting Paying Trading across Enforcing Closing a Economy a business licenses workers property credit investors taxes borders contracts business Egypt Croatia Ghana Macedonia, FYR Georgia Colombia Saudi Arabia Kenya China Bulgaria Note: Economies are ranked on the number and impact of reforms. First, Doing Business selects the economies that reformed in 3 or more of the Doing Business topics. Second, it ranks these economies on the increase in rank on the ease of doing business from the previous year. The larger the improvement, the higher the ranking as a reformer. Source: Doing Business database. registration system for business start-up. Comparing business regulations across South East Other economies are also reforming albeit at a slower Europe pace. Albania established a one-stop shop in September 2007, which slashed the time for starting a business from 36 days to In starting a business, the region has a number of good prac- 7 days. In Montenegro, the new Law on Statistics has reduced tices. Vlora’s (Albania) fast and simple business registration the number of days needed to obtain company identification process is comparable to the world’s top-25 performers on by 4 days. Serbia reduced the property transfer tax from 5.0% this indicator. Zlatnic, a hypothetical city that combines the to 2.5% of property value. best business start-up practices from the 22 cities covered, To become more competitive, the economies of South would rank 6th globally. Yet, these practices are not consistent East Europe must continue to improve business regulations throughout the region. Some cities perform significantly bet- and keep up with the reformers of Eastern Europe and Cen- ter than others due to more efficient national and municipal tral Asia. Bulgaria and Georgia are among the top-10 reform- regulations in the registration process, fees and post-registra- ers in the world. Armenia, Azerbaijan, Belarus, the Czech tion procedures with departments such as the health fund, Republic, Estonia, Hungary, Kazakhstan, the Kyrgyz Repub- tax authority and social security.