OVERVIEW 1 Doing Business in Colombia 2017 Overview
Comparing Business Regulation for Domestic Firms in 32 Colombian Cities with 189 Other Economies 2 DOING BUSINESS IN COLOMBIA 2017
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Doing Business in Colombia 2017 presents for the first time a comparative analysis of the regulatory environment for doing business across the country in four areas of business regulation: starting a business, dealing with construction permits, registering property and paying taxes.
Based on the overall ranking of the four areas measured, it is easiest to do business in Manizales, Pereira and Bogotá. Manizales and Pereira continue to hold the top spots; Bogotá has been improving gradually since 2010 and holds the third position.
There is a sizeable gap between the best- and worst- performing cities. Generally, the smaller the city, the more procedures are required; this is partly because some regulatory improvements have yet to reach all cities.
Between 2013 and 2016, all the cities except for Ibagué and Santa Marta moved closer toward the frontier of best global practices. The cities that improved the most were Valledupar, Cúcuta, Leticia and Pereira. Of these, Valledupar made the most progress, by introducing reforms in three of the four areas.
There is still room to improve business regulation and simplify procedures for entrepreneurs. Promoting comparable performance between cities, improving coordination between agencies and moving forward on the initiatives that are under implementation are some of the ways to do that. 4 DOING BUSINESS IN COLOMBIA 2017
etween 2010 and 2013, income from oil production in Colombia fueled National entrepreneurs face different realities Beconomic growth, increased rev- depending on where they are located. enues for the country’s territorial entities and brought about social improvements. and modernizing the cadastre, under a they are located. Doing Business in In fact, from 2010 to 2016, more than 5 multipurpose model to be implemented Colombia 2017—the fourth in the series of million people emerged from poverty.1 over the long term.8 This initiative stands subnational Doing Business studies in the With the fall in oil prices since mid-2014, to produce several benefits: It will enable country—is presenting for the first time the fiscal and monetary measures adopted local revenues to increase due to higher a comparative assessment of the regula- by the national government contained the property tax collections; give legal cer- tory environment for business in the 32 negative effect on its terms of trade2 and tainty regarding land rights and tenure; departmental capitals in four areas: start- economic growth remained above the and provide tools for planning urban and ing a business, dealing with construction regional average.3 Nevertheless, the small rural land use. permits, registering property and paying effect of the Colombian peso devaluation taxes. on the country’s exports showed that This fourth edition of Doing Business in it still has a long way to go to diversify Colombia—the first that covers the ease of This edition reflects the changes made to the economy and increase productivity. doing business throughout the country— the methodology for three of the four indi- According to government figures, for 12 comes in the context of a national policy cators analyzed since the last study was years during the 1991-2015 period there to “close the gap”9 between regions, and done (2012). In the areas of dealing with was either no growth or negative growth at a time of expectations regarding the construction permits, registering property in productivity.4 In terms of labor pro- social and economic benefits10 to be and paying taxes, new qualitative aspects ductivity, the last report on national derived from the implementation of the have now been added to complement competitiveness notes that for every peace agreement signed in 2016 with the those related to efficiency. The reasoning worker in the United States, 4.3 workers Revolutionary Armed Forces of Colombia is that it is not enough to improve the are needed in Colombia to produce the (FARC-EP).11 Promoting a business efficiency of procedures if the institutions same value added.5 The government’s climate that encourages entrepreneur- function poorly and provide a low quality 10-year policy for productive development ship, business growth and job creation of service. In terms of dealing with con- (2016-25) includes among its objectives in Colombian cities will also be critical to struction permits, this study now consid- identifying the sectors and products with achieve regional convergence and reduce ers, among other things, the professional growth potential to diversify the economy. the high levels of inequality that persist in qualifications of those in charge of exam- The policy also incorporates a territorial the country.12 ining projects and approving construction perspective, as it takes into account the licenses, inspections of projects, and the economic differences between regions liability and insurance regimes that apply and establishes mechanisms—such as the WHAT DOES DOING to construction activity. The registering strengthening of regional competitiveness BUSINESS IN COLOMBIA property indicator evaluates access to commissions—to implement local com- 2017 MEASURE? registry information, the operation and petitiveness agendas and capitalize on the coverage of the registries and mapping comparative advantages of each area.6 Doing Business in Colombia 2017 analyzes system (cadastre), and dispute resolution commercial regulations from the per- mechanisms related to property rights. Improving the country’s competitiveness spective of small and medium-size local Finally, the paying taxes indicator reflects and promoting the development of the businesses. Bogotá represents Colombia procedures subsequent to the filing and regions are also strategies of the National in the annual report that compares 190 payment of taxes, such as tax refunds and Development Plan for the last four-year economies around the world. National audits. term (2014-18) of this administration, to codes, laws and decrees regulate maintain peace and reduce inequality. A institutions, set fees and establish time The method used to calculate the overall new tax reform7 took effect in January frames and requirements for completing ranking and the ranking by indicator has 2017; it seeks to strengthen public transactions. However, local govern- also changed. Rankings by indicator are finances through a more equitable fis- ments have jurisdiction to set payments calculated based on the “distance to cal policy that incentivizes paying taxes and rates for certain taxes; they also frontier” measure. This measure uses a and stimulates job creation. Proposed influence the efficiency and degree of 0 to 100 scale—where 100 represents improvements to the land administration collaboration between their agencies. the best practice identified globally and system include reforming property reg- That is why national entrepreneurs face 0 the worst—to show how far a given istration, updating cadastral information different realities depending on where economy is from “the frontier,” which is OVERVIEW 5
the best performance observed for each FIGURE 1.1 It is easiest to do business in Manizales, Pereira and Bogotá of the indicators at an international level. SAN ANDRÉS Y PROVIDENCIA The overall ranking is based on the aver- COLOMBIA age distance to frontier for each of the Isla de Providencia AGGREGATE RANKING four areas measured. Each city’s ranking Riohacha 1 LA enables it to be compared with the other Santa Marta GUAJIRA 5 Barranquilla cities in the country and with 189 other ATLÁNTICO Cartagena 10 economies around the world.13 Valledupar San Andrés MAGDALENA Isla de San Andrés CESAR 15 Sincelejo The data in the report are based on laws, Montería 20 decrees, regulations, administrative pro- SUCRE BOLÍVAR NORTE DE cedures and official fees, as well as on CÓRDOBA SANTANDER 25 correspondence and interactions with Cúcuta more than 300 professionals, including Bucaramanga Arauca 32 ANTIOQUIA lawyers, architects, engineers, construc- SANTANDER ARAUCA tion companies, accountants and profes- Medellín Puerto sional associations with knowledge and CHOCÓ Carreño BOYACÁ Quibdó CASANARE CALDAS experience about the procedures analyzed Tunja Yopal RISARALDA Manizales in the study. More than 400 government CUNDINAMARCA Pereira VICHADA Armenia Bogotá officials participated in the process by QUINDÍO Ibagué Villavicencio providing information. The results are up VALLE DEL TOLIMA Inírida 14 CAUCA META to date as of December 31, 2016. Cali Neiva GUAINÍA CAUCA HUILA San José Popayán del Guaviare WHAT DO THE RESULTS GUAVIARE SHOW? NARIÑO Florencia Pasto Mitú Mocoa According to the aggregate ranking of PUTUMAYO CAQUETÁ VAUPÉS the four areas studied, it is easiest to do business in Manizales, Pereira and Bogotá (figure 1.1). These three cities are closest to the frontier of best regulatory AMAZONAS practices. Manizales and Pereira have IBRD 43115 | SEPTEMBER 2017 continued to hold the top positions since CAPITAL OF DEPARTMENT This map was produced by the Cartography Unit of the World the first edition in 2008 of Doing Business BOUNDARIES BETWEEN DEPARTMENTS Bank Group. The boundaries, colors, denominations and any other information shown on in Colombia and they have consistently this map do not imply, on the part of the World Bank Group, any judgment on the legal status of any territory, or any implemented reforms. endorsement or acceptance of Leticia such boundaries.
In this edition, Manizales and Pereira have Note: The color scale reflects each city’s position in the overall ranking of the fourDoing Business indicators examined high rankings in three of the four areas in Colombia’s 32 departmental capitals. Dark green represents greater regulatory efficiency and dark red, less efficiency. analyzed (table 1.1). Pereira was also one Source: Doing Business database. of the cities that has shortened the most its distance toward best global practices. in Colombia (figure 1.2). For starting a Organisation for Economic Co-operation Bogotá began advancing gradually in business, one third of the cities had similar and Development (OECD). But Inírida, 2010 and is now in third place. rankings to those of Germany, Austria and in last place on the national scale for this Poland—high-income economies in the indicator, ranks far lower; the number of If the results are analyzed by indicator, what stands out first is the major differ- ences in performance between cities in Manizales and Pereira have continued to hold distance to frontier. Examining this in an the top positions since the first edition in 2008 international context allows for a better appreciation of the magnitude of the gap of Doing Business in Colombia and they have between the best and worst performances consistently implemented reforms. 6 DOING BUSINESS IN COLOMBIA 2017 8 7 3 5 4 2 6 1 9 15 19 20 23 14 32 15 31 24 18 28 27 25 21 26 29 11 10 30 17 22 12 13 Ranking (in Spanish). The The (in Spanish). Paying taxes Paying DTF 62.14 62.36 60.98 59.58 62.91 59.08 58.77 61.05 56.71 60.98 56.76 62.42 58.69 60.18 62.47 63.00 62.39 58.06 76.34 58.32 58.63 59.06 58.45 57.46 61.64 61.66 56.78 60.80 58.93 61.83 61.35 61.27 1 4 2 7 5 3 9 8 6 21 30 32 19 21 31 18 15 16 23 24 10 27 26 20 17 14 13 25 11 11 28 29 Ranking
Doing Business in Colombia 2017” DTF Registering property Registering property 61.91 71.54 59.27 70.04 56.35 71.32 63.40 68.26 61.91 69.50 58.31 64.82 70.53 65.64 65.49 67.44 67.92 61.76 61.62 66.72 61.15 61.23 62.74 65.25 65.80 65.86 61.28 66.23 66.23 60.63 59.64 68.77 and 1 6 4 5 9 7 8 3 2 16 18 10 31 13 27 23 17 12 24 28 26 29 19 22 11 30 25 14 15 20 20 32 Ranking
Doing Business Dealing with DTF construction permits 66.77 74.04 69.94 72.21 66.22 68.37 50.68 67.23 58.56 70.59 63.30 66.56 68.41 67.76 62.40 58.45 60.29 68.86 57.79 68.50 65.78 72.94 63.41 68.07 57.71 61.71 67.12 66.97 65.63 65.63 73.34 47.71 4 1 8 6 5 3 9 2 6 31 30 27 17 18 29 19 13 14 10 22 20 24 11 23 15 21 16 28 25 26 32 12 Ranking Starting a business DTF 70.28 85.80 70.52 86.06 74.17 85.31 85.53 85.67 80.59 80.28 72.12 85.85 80.01 83.63 85.22 85.93 83.15 84.79 77.59 78.63 85.53 76.41 84.55 77.11 82.18 77.85 81.76 72.25 75.17 75.05 68.76 83.83 64.15 73.14 62.45 68.78 62.84 70.63 64.19 68.77 64.05 67.18 62.13 66.10 65.58 67.02 68.29 65.97 66.92 66.32 67.20 66.84 66.10 66.72 66.13 68.18 65.80 65.18 64.58 64.70 66.17 62.56 64.14 65.75 Distance to (4 indicators) DB2013 score frontier (DTF) – frontier 73.43 65.18 71.97 64.91 71.02 64.59 70.55 64.44 70.34 62.62 69.91 69.41 69.31 68.90 68.70 68.44 68.37 68.34 68.04 67.77 67.41 67.29 66.97 66.83 66.77 66.73 66.56 66.49 65.78 65.77 65.39 65.28 Distance to (4 indicators) DB2017 score frontier (DTF) – frontier 1 2 3 4 5 6 7 8 9 28 29 30 31 32 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 ranking ranking Aggregate Aggregate (4 indicators) 16,000 42,882 72,585 66,679 90,924 41,639 19,983 31,861 398,874 474,356 178,449 450,815 454,032 662,765 473,232 345,911 116,087 299,712 505,996 282,833 146,204 499,257 528,575 282,561 195,496 277,913 564,077 8,080,734 2,420,013 2,508,452 1,228,621 1,025,086 Population inhabitants) (thousands of database and population projections from the National Administrative Department of Statistics (DANE) for 2017. Administrative database and population projections from the National How easy is it to do business in Colombian cities, and how do they compare with the best regulatory practices? How easy is it to do business in Colombian cities,
Doing Business
The distance to frontier captures the difference between each city’s performance and the best performance or “frontier” observed globally for each of the four areas examined (starting a business, dealing with construction permits, dealing with construction permits, observed globally for each of the four areas examined (starting a business, “frontier” performance and the best or distance to frontier captures the difference between each city’s The TABLE 1.1 TABLE City (Department) Manizales (Caldas) distance to frontier from the 2013 report includes all data corrections and methodological changes implemented since then. registering property and paying taxes). The overall ranking is based on the average distance to frontier for each of the four areas measured. The distance to frontier for each city is reflected on a scale from 0 to 100, with 0 representing the with 0 representing the distance to frontier for each city is reflected on a scale from 0 100, The distance to frontier for each of the four areas measured. is based on the average ranking overall The registering property and paying taxes). “About see the chapter For more details, the more efficient regulatory environment. higher the score, The “frontier.” or lowest result and 100 the best global practice Puerto Carreño (Vichada) (Risaralda) Pereira Florencia (Caquetá) Bogotá (Cundinamarca) (Valle del Cauca) Cali (Valle Medellín (Antioquia) (Nariño) Pasto Montería (Córdoba) Mocoa (Putumayo) Cúcuta (Norte de Santander) (Cesar) Valledupar (Huila) Neiva Quibdó (Chocó) Armenia (Quindío) (Meta) Villavicencio Sincelejo (Sucre) (San Andrés y Providencia) San Andrés (San (Casanare) Yopal Barranquilla (Atlántico) San José del Guaviare (Guaviare) Cartagena (Bolívar) Santa Marta (Magdalena) Bucaramanga (Santander)
(Cauca) Popayán Note: Source: Arauca (Arauca) (Boyacá) Tunja Riohacha (La Guajira) Leticia (Amazonas) Inírida (Guainía) Ibagué (Tolima) Mitú (Vaupés) OVERVIEW 7
FIGURE 1.2 On a global scale, the gap separating the best and worst performances in dealing with construction permits places Colombian cities in two different worlds
Doing Business ranking (1-1 economies)
1 25 highest ranked 4 74. 4 Manizales 71.54 Manizales 76.34 San Andrés