COMPARING BUSINESS REGULATION ACROSS THE REGION AND WITH 183 ECONOMIES A COPUBLICATION OF THE WORLD BANK AND THE INTERNATIONAL FINANCE CORPORATION © 2011 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 E-mail [email protected] All rights reserved. A publication of the World Bank and the International Finance Corporation. This volume is a product of the staff of the World nkBa 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 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. 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Copies of the Doing Business global reports: Doing Business 2011: Making a Difference for Entrepreneurs; Doing Business 2010: Reforming through Difficult Times; Doing Business 2009; Doing Business 2008; Doing Business 2007: How to Reform; Doing Business in 2006: Creating Jobs; Doing Business in 2005: Removing Obstacles to Growth; and Doing Business in 2004: Understanding Regulations, may be obtained at www.doingbusiness.org. Contents Doing Business in South East Europe 2011 Doing Business investigates the reg- Executive summary 1 is the second subnational report of the ulations that enhance business activity Doing Business series in South East Eu- and those that constrain it. Regulations About Doing Business and Doing 9 rope. In 2008, quantitative indicators on affecting four stages of the life of a busi- Business in South East Europe 2011 business regulations were created for 22 ness are measured at the subnational Starting a business 14 cities in 7 economies: Albania, Bosnia level in South East Europe: starting a Dealing with construction permits 20 and Herzegovina, Croatia, Kosovo, FYR business, dealing with construction per- Macedonia, Montenegro, and Serbia. This mits, registering property and enforcing Registering property 27 year, Doing Business in South East Europe contracts. These indicators were selected Enforcing contracts 32 2011 documents progress in 18 of the 22 because they cover areas of local jurisdic- Data notes 38 cities previously measured—4 cities from tion or practice. Croatia are no longer included—and ex- The data inDoing Business in South City tables 45 pands the analysis to 4 new cities—Balti East Europe 2011 are current as of Janu- Doing Business indicators 51 (Moldova), Chisinau (Moldova), Durres ary 2011. The indicators are used to List of procedures (Albania), and Tetovo (FYR Macedonia). analyze economic outcomes and identify Starting a business 55 For a complete list of cities and economies what reforms have worked, where and measured in this report, please see City why. Dealing with construction permits 73 tables on page 45. This report is the result of collabo- Registering property 105 Comparisons with other economies ration between IFC Southern Europe Acknowledgments 118 are based on Doing Business 2011: Mak- Investment Climate Advisory Services ing a Difference for Entrepreneurs, the and the subnational Doing Business team eighth in a series of annual reports pub- of the Global Indicators and Analysis De- lished by the World Bank and the Inter- partment, World Bank Group. The report national Finance Corporation. The indi- was produced with the financial sup- cators in Doing Business in South East port of the Government of Switzerland Europe 2011 are also comparable with through the State Secretariat for Eco- more than 300 cities from 38 economies nomic Affairs (SECO), the Government benchmarked in other subnational Doing of Austria, and the United States Agency Business studies. All data and reports for International Development (USAID). are available at www.doingbusiness.org/ subnational and www.doingbusiness.org. STARTING A BUSINESS 1 TABLE 1.1 Executive Cities from FYR Macedonia, Montenegro, Moldova, and Serbia take the lead on the 4 Doing Business topics measured summary Ranking (1-22) Ease of dealing Ease of with Ease of Ease of starting a construction registering enforcing Economy City business permits property contracts Durres* 9 11 13 14 Shkodra 8 3 9 11 Albania Tirana 10 NO PRACTICE 16 18 Vlora 7 9 10 10 Banja Luka 18 3 21 15 Bosnia and Mostar 20 13 22 20 Herzegovina Sarajevo 19 9 19 19 Pristina 22 17 18 21 Kosovo Prizren 21 6 14 22 Bitola 2 12 3 5 It is a matter of conjecture whether the FYR Macedonia Skopje 1 2 15 9 economies of South East Europe consti- Tetovo* 3 3 6 3 tute a unique region. Certainly, it is a place Balti* 13 8 1 4 Moldova which has historically been shaped more Chisinau* 17 19 1 2 by politics and the interests of foreign Niksic 5 1 6 17 powers than economic forces. Yet it is Montenegro Pljevlja 4 6 4 7 economic forces, particularly those asso- Podgorica 6 18 20 16 ciated with transition and integration, and Belgrade 11 21 16 11 the deep reforms needed to move from a Krusevac 16 20 10 11 planned to a market economy, which have Serbia Uzice 12 16 10 6 imposed themselves as the most forma- Vranje 14 13 5 7 tive influences on the direction of the Zrenjanin 14 13 6 1 region’s public policies. While the region Note: The ranking on each topic is based on the simple average of the percentile rankings on its component indicators. See Data notes for details. was once the inspiration for the term *City not benchmarked in Doing Business in South East Europe 2008 report. “balkanization”—describing the disinte- Source: Doing Business database. gration of a state into smaller antagonistic parts—the recent past, global economic former, has been added. Some econo- complying with regulations brings more crisis notwithstanding, speaks of increas- mies face ongoing political conundrums benefits than costs. In an era of tight ing cooperation, economic growth, and which remain open challenges. Overall, budgets and high unemployment, re- foreign direct investment. Over the last however, the political legitimacy which forms making it easier to do business decade, the region has gradually become comes from economic progress has been make more sense than ever. They help a more settled and economically advanced a lesson learned by governments across create jobs and boost growth without area on the immediate periphery of the the region. There is an abiding drive for costing governments much. This report European Union (EU). competitiveness amongst and between shows that the economies of South East Despite perceptions, the region is all of them. Competitive economies can- Europe have continued to implement quite diverse and the changes since the not survive as islands of growth but micro-economic reforms in spite of chal- 2008 Doing Business in South East Eu- must build interdependency with their lenges presented by the global financial rope report reflect that fact. Some of neighbors and further afield. As a con- crisis. The report also shows that the the countries have progressed further sequence, economic forces are asserting results of recent reforms can be seen at in transition while others have a dis- their pre-eminence in the region. Where the municipal level across the region. tance to go. Some are on the cusp of there was once political disintegration, Coupled with other factors—such as the the European Union while others have markets are encouraging investment and availability of a skilled workforce—im- yet to attain “candidate” status. Croatia, trading linkages across state borders. proving the business environment in the in the final stages of accession discus- There is no blueprint for how to region’s secondary cities will continue to sions with the European Union, is no grow and prosper but one factor is creat- have a positive impact. longer included in this regional report. ing an investment climate conducive to Doing Business studies business reg- In turn, Moldova, a newly emerged re- starting and running a business, where ulations from the perspective of a small 2 DOING BUSINESS IN SOUTH EAST EUROPE 2011 FIGURE 1.1 be attributed to the addition of 4 new cit- The region's economies* made large strides in improving commercial regulations Improvement in the ranking on the ease of doing business, Doing Business 2008–2011 ies, some of which have competitive reg- ulatory frameworks. For example, Balti 1102030405060708090100110 120 130 140 150 160 170 183 (Moldova) ranks at the top on the ease Albania 136 TO 82 of property registration. Tetovo (FYR 9 REFORMS FYR Macedonia Macedonia) is one of the most efficient 75 TO 38 17 REFORMS cities for enforcing a contract. On the Montenegro other hand, the cities that improved their 81 TO 66 7 REFORMS business regulations the most during Moldova the past 3 years—such as Skopje (FYR 92 TO 90 6 REFORMS Macedonia) and Banja Luka (Bosnia and Herzegovina)—surpassed their peers.