Business Removing

20 DOING BUSINESS IN 2005
Procedures
Governments can reduce the number of procedures
while maintaining the same level of regulation. Turkey
did this. In June 2003, 7 procedures—obtaining a permit
from the Ministry of Industry and Trade, making a payment
to the consumers’ fund, registering at the trade
registry, registering for taxes, for social security, at the
chamber of commerce and at the ministry of labor—
were combined into one, and delegated to the chambers
of commerce (figure 3.3). Application forms were unified
and shortened, and registry officers were trained in
customer relations. None of the substantive requirements
for the procedures were changed. 6 A new business
can now be started in about a week.
A year ago Colombia was tied with Belarus and
Chad for the most procedures. Since then it established
business help centers and concentrated several procedures,
relocating representatives of each agency to the
new offices. The number of procedures dropped from 19
to 14—the time, from 60 days to 43.
Belgium launched online registration and combined
4 procedures into 1 at a company center. In so
doing it entered the list of countries with fewest procedures.
The office now handles responsibilities previously
performed at the trade registry, social security registry
and the tax registry. Time was cut from 56 days to 34.
Time
Eliminating or combining procedures gave the largest
time savings. But some countries also cut time by reforming
individual procedures. Argentina established a
fast-track process for registration, reducing the time to
obtain a company identification number from 14 days to
FIGURE 3.3
Big changes in Turkey in 2003
Time
Time reduced
from 38 days to 9
Source: Doing Business database.
2003
2004
Number of procedures
2003
Procedures reduced
from 13 to 8
5. Sri Lanka computerized the registry office, cutting a
week off of waiting time. Moldova also introduced a new
electronic system at the state registration chamber, reducing
delays by a third.
Cost
Reducing costs can be straightforward. Ethiopia did it by
eliminating the requirement to publish notices in two
newspapers. Costs plummeted from almost 500% of income
per capita to 77%, and time fell from 44 days to 32.
Albania eliminated some registration fees, almost halving
cost to 32%. Georgia cut the start-up cost from 23%
to 14%. The Democratic Republic of Congo reduced
cost by a third, albeit to a still staggering 557% of the income
per capita.
Capital
Scrapping minimum capital requirements is a difficult
reform because it requires legislative change. France was
the only economy to abolish the requirement last year,
and Bosnia and Herzegovina was the only one to reduce
it. And the new draft company law in Serbia and
Montenegro contemplates a significant reduction in
2005: from 5,000 Euro to 10.
Some justify capital requirements as protecting
creditors and society against damage from failing or untrustworthy
businesses. But in many countries minimum
capital can be paid with in-kind contributions,
such as management time—hardly of value in insolvency.
In others the capital may be withdrawn immediately
after registration. In practice recovery rates in insolvency
are no different between countries with and
without minimum capital requirements. 7 The countries
that developed the requirement in the 18th century—
England and France—have both scrapped it.
Others should follow. Cambodia shows why. It takes
almost 5 times the income per capita in official fees to
start a business in Phnom Penh. Also the entrepreneur
needs to deposit CR20 million, or about $5,100, in a
bank account during the registration process: more than
17 times the income per capita. Add other official costs,
and the entrepreneur needs $6,650, or 22 times the income
per capita (figure 3.4). In the United States this
would amount to $833,000. In reality the official fees for
starting a business in New York City are $210, and there
is no minimum capital requirement.
High capital requirements are common in the Middle
East and North Africa. Syria imposes the world’s
highest, at 50 times the income per capita. But this is a
20th century invention. 8 Before then, the Middle East