TH EDITION A World Bank Group Flagship Report Doing .

VIDOING BUSINESS 2017for only 40.8% of the formal workforce.In emerging markets between 31 and38% of formal small and medium-sizeenterprises have at least one womanowner, but their average growth rateis significantly lower than that of maleowned firms.2 Gender gaps in women’sentrepreneurship and labor force participation account for an estimated totalincome loss of 27% in the Middle Eastand North Africa, a 19% loss in SouthAsia, a 14% loss in Latin America andthe Caribbean and a 10% loss in Europe.3Globally, if all women were to be excludedfrom the labor force income per capitawould be reduced by almost 40%.4To capture ways in which governmentsset additional hurdles for women entrepreneurs, Doing Business 2017 considersfor the first time a number of genderspecific scenarios. The area of companyincorporation, for example, now exploreswhether companies owned by womenhave the same registration requirementsas companies owned by men. It finds thatin some economies women must submitadditional paperwork or authorizationsfrom their husbands. In the case ofproperty transfers there is a new focuson property ownership and how differentsets of rights between men and womenaffect female entrepreneurs’ access tocredit. Finally, when it comes to genderequality in court, the enforcing contractsindicator now highlights places where awoman’s testimony is given less weightin court than a man’s, thereby puttingher at a fundamental disadvantage incommercial dealings. Doing Business nowincorporates these considerations tobetter reflect the ease of doing businessfor the widest range of entrepreneurs ina given economy, female entrepreneursincluded. The adjustments build on several years of methodology developmentand cross-country data collection bythe Women, Business and the Law project,housed in the Global Indicators Group.Doing Business 2017 also contains adiscussion of the role business regulatory reform may play in the global goalto reduce income inequality. Of coursethere are many determinants of incomeinequality, including economic growthpatterns, the levels and the quality ofinvestments in human capital and theprevalence of bribery and corruption,among many others. Yet some are linkedto the regulatory environment for entrepreneurship. Potential entrepreneursare often discouraged from setting upbusinesses if the requirements to doso are overly burdensome. When thisis the case entrepreneurs often resortto operating within the informal sectorwhich has less protection for labor conditions and is more vulnerable to economicshocks. Having simple, transparent rulesfor registering a business, paying taxes,getting credit and registering propertyhelps create a level playing field for doingbusiness. Evidence from 175 economiesreveals that economies with more stringent entry regulations often experiencehigher levels of income inequality asmeasured by the Gini index.5At its core, Doing Business seeks to provide quantitative measures of businessregulation in 11 regulatory areas that arecentral to how the private sector functions. A growing body of literature showsthat government action to create a sound,predictable regulatory environment iscentral to whether or not economies perform well and whether that performanceis sustainable in the long run.6 Regulationcan aid to correct and prevent traditionaltypes of market failures, such as negative externalities, incomplete marketsand information asymmetries. However,regulation can also be used as an intervention when market transactions haveled to socially unacceptable outcomessuch as improper wealth distribution andinequality.7 Governments have the abilityto design and enforce regulation to helpensure the existence of a level playingfield for citizens and economic actorswithin a society.8Business regulations are a specific typeof regulation that can encourage growthand protect individuals in the privatesector. The role of the private sector isnow almost universally recognized as akey driver of economic growth and development. Nearly 90% of employment(including formal and informal jobs)occurs within the private sector—thissector has abundant potential that shouldbe harnessed.9 Governments can worktogether with the private sector to createa thriving business environment. Morespecifically, effective business regulationcan encourage firm start-up and growthas well as minimize the chance formarket distortions or failures. Of course,a discussion of the benefits of businessregulation must be accompanied by aparallel discussion of its costs. Manybusinesses complain about the negativeimpacts of excessive regulation—or asit is more commonly known, “red tape.”The answer is not always more regulation; rather, the more effective answeradvocated by Doing Business is smarterregulation, that aims to strike a balancebetween the need to facilitate the activities of the private sector while providingadequate safeguards for the interests ofconsumers and other social groups.More economies are taking up the challenge for reform. New Zealand is the economy with the highest ranking this year,taking over from Singapore. Sub-SaharanAfrican economies are also improvingtheir Doing Business scores at a rate thatis three times that of OECD high-incomeeconomies. This rate of improvementreflects a low base, but is nonethelessencouraging. Indeed, over the past decadethere has been more than a doubling inthe number of countries in Sub-SaharanAfrica that are engaged in one or morebusiness regulatory reforms—a total of 37economies in this year’s report. The overarching goal of Doing Business is to helpentrepreneurs in low-income economiesface the easier business conditions of theircounterparts in high-income economies.The data show persuasively that it isfacilitating that convergence, and for thatwe should celebrate.The story I told above about an idealaunched in 1983 in Peru by Hernandode Soto reminds us that ideas gain poweras they pass from person to person,

FOREWORDeach of whom improves, extends, orchallenges the contributions of others. Inthe best case, this process of exchangeand improvement connects professorsin universities, employees of organizations such as the World Bank, government officials, members of civil societyorganizations, business owners andordinary citizens. Ideas about improvingour institutions will themselves improveonly if they keep circulating through thisnetwork of people.We welcome your continued feedback onthe Doing Business project. As I start in therole of the World Bank’s Chief Economist,I am astonished by how much room forimprovement there is in everything thatpeople do. This heightens my sense ofimpatient optimism about the potentialfor meeting the Bank’s two goals: endingextreme poverty and promoting sharedprosperity. Doing Business helps us makeprogress on one crucial strategy formeeting these goals—offering marketopportunities to everyone. It should alsoinspire us to be more ambitious abouthow to carry out other complementarystrategies. We depend on you, the reader,to help us shape, improve, extend andreplicate this project. You keep its ideasin motion. You give them power.NOTES1.2.3.4.5.6.7.8.9.World Bank 2015a.World Bank Group 2011.Cuberes and Teignier 2014.Cuberes and Teignier 2014.McLaughlin and Stanley 2016.Hall and Jones 1999; Rodrick 1998; Jalilian,Kirkpatrick and Parker 2006.Parker and Kirkpatrick 2012.Bufford 2006.World Bank Group 2013.Paul M. RomerChief Economist andSenior Vice PresidentThe World BankWashington, DCVII

VIIIDOING BUSINESS 2017

Doing Business 2017OverviewThe opportunity to find a job ordevelop one’s business idea iscrucial for most people’s personalsatisfaction. It creates a sense of belonging and purpose and can provide anincome that delivers financial stability. Itcan raise people out of poverty or preventthem from falling into it.But what does one need to find a job orto start a business, especially if that jobor business is in the private sector? Manythings are needed, but well-functioningmarkets—that are properly regulatedso that distortions are minimized—arecrucial. Governments play a pivotal rolein establishing these well-functioningmarkets through regulation. If the landregistry is not required to provide reliable information on who owns what, forexample, the efficacy of the propertymarket is undermined making it difficultfor entrepreneurs to acquire property,put their ideas to practice and createnew jobs. Without well-regulated creditinformation sharing systems it is difficultfor credit markets to thrive and be moreinclusive. A properly functioning tax system is also key. Where the burden of taxadministration is heavy—making it difficult to comply with tax obligations—firmswill have an incentive to avoid payingall taxes due or may opt for informality,thereby eroding the tax base.To start a business, entrepreneurs need abusiness registration system that is efficient and accessible to all. Doing Businessdata on Argentina, for example, showthat it takes 14 procedures to start a newbusiness, double the global average of justseven. So it is perhaps unsurprising thatthere are only 0.43 formal new businessesper 1,000 adults in Argentina. By contrast,in Georgia—where three procedures aresufficient to start a business—there areover 5.65 formal new businesses per1,000 adults.Failure is part of taking risks and innovating. For people to be willing to start anew business there needs to be a welldeveloped system in place for closing businesses that do not succeed. In addition tothe complicated entry process in Argentina,if the business fails only 23 cents on thedollar are recovered after going through aninsolvency proceeding. By contrast, in theCzech Republic the same business failurewould have a recovery rate of 67 centson the dollar. This higher recovery ratealso helps to explain the larger number ofnew businesses in Prague (at 3.42 formalnew businesses per 1,000 adults) thanin Buenos Aires.OLD AND NEW FACTORSCOVERED IN DOINGBUSINESSDoing Business focuses on regulation thataffects small and medium-size enterprises, operating in the largest business cityof an economy, across 11 areas.1 Ten ofthese areas—starting a business, dealingwith construction permits, getting electricity, registering property, getting credit,protecting minority investors, payingtaxes, trading across borders, enforcingcontracts and resolving insolvency—areincluded in the distance to frontier score Doing Business measures aspects ofregulation that enable or preventprivate sector businesses fromstarting, operating and expanding.These regulations are measured using11 indicator sets: starting a business,dealing with construction permits,getting electricity, registering property,getting credit, protecting minorityinvestors, paying taxes, trading acrossborders, enforcing contracts, resolvinginsolvency and labor market regulation. Doing Business 2017 expands the payingtaxes indicators to cover postfilingprocesses—tax audits, tax refunds andtax appeals—and presents analysis ofpilot data on selling to the governmentwhich measures public procurementregulations. Using the data originally developed byWomen, Business and the Law, this yearfor the first time Doing Business adds agender component to three indicators—starting a business, registering property,and enforcing contracts—and finds thatthose economies which limit women’saccess in these areas have fewer womenworking in the private sector both asemployers and employees. New data show that there has been anincrease in the pace of reform—moreeconomies are reforming andimplementing more reforms. Doing Business has recorded over 2,900regulatory reforms across 186 economiessince 2004. Europe and Central Asiahas consistently been the region withthe highest average number of reformsper economy; the region is now close tohaving the same good practices in placeas the OECD high-income economies.A number of countries in the region—Georgia, Latvia, Lithuania, and the formerYugoslav Republic of Macedonia—arenow ranked among the top 30 economiesin Doing Business. Better performance in Doing Business ison average associated with lower levelsof income inequality. This is particularlythe case regarding the starting a businessand resolving insolvency indicator sets.

2DOING BUSINESS 2017and ease of doing business ranking. DoingBusiness also publishes indicators on labormarket regulation which are not includedin the distance to frontier score or easeof doing business ranking. The economicliterature has shown the importance ofsuch regulations for firm and job creation,international trade and financial inclusion.For more discussion on this literature, seethe chapter About Doing Business.Over time, Doing Business has evolvedfrom focusing mainly on the efficiencyof regulatory processes to also measurethe quality of business regulation. DoingBusiness not only measures whether thereis, for example, a fast, simple and affordable process for transferring property butalso whether the land administration hassystems in place that ensure the accuracyof the information about that transfer.This year Doing Business expands furtherby adding postfiling processes to thepaying taxes indicators, including a gender component in three of the indicatorsand developing a new pilot indicator seton selling to the government (figure 1.1).Also for the first time this year DoingBusiness collects data on Somalia, bringing the total number of economies covered to 190.Although conceptually important, thesechanges have a small impact on theFIGURE 1.1 What is changing in DoingBusiness?Starting a businessRegistering propertyEnforcing contractsIndicatorswith newgendercomponentsPaying taxes (addingpostfiling processes)Indicatorswith newcomponentsPilot indicator setSelling to the governmentSource: Doing Business database.distance to frontier and the overall doingbusiness ranking. In paying taxes, thenew postfiling processes componentaccounts for only 25% of the overallindicator set and, furthermore, there is apositive correlation between the old andnew part of the indicator.2 Economiesthat have efficient processes for payingtaxes during the regular filing periodalso tend to have efficient processes inthe postfiling period. For the most part,the formal regulatory environment asmeasured by Doing Business does notdifferentiate procedures according tothe gender of the business owner. Theaddition of gender components to threeseparate indicators has a small impacton each of them and therefore a smallimpact overall. However, even if business regulation as measured by DoingBusiness is gender blind in the majorityof economies, this does not mean thatin practice men and women have equalopportunities as business owners. Firmsowned by women, for example, tend tobe smaller and less profitable than firmsowned by men.3While economies that do well in theexisting dimensions of the regulatoryenvironment covered by Doing Businessalso tend to do well in the new aspectsmeasured this year, it nevertheless isimportant to document regulatory practices in these new areas. Doing so helpsto document standards of good practicesin new areas of regulation which policymakers can use to chart out reforms andset benchmarks. For more information onthe Doing Business methodology, see thedata notes.TaxesThe paying taxes indicator set isexpanded this year to include postfilingprocesses—those processes that occurafter a firm complies with its regular taxobligations. These include tax refunds, taxaudits and tax appeals. In particular DoingBusiness measures the time it takes to geta value added tax (VAT) refund, deal witha simple mistake on a corporate incometax return that can potentially trigger anaudit and good practices in administrativeappeal processes.The VAT refund is an integral componentof a modern VAT system. The VAT hasstatutory incidence on the final consumer, not on businesses. According tothe tax policy guidelines set out by theOrganisation for Economic Co-operationand Development (OECD) a VAT systemshould be neutral and efficient.4 Somebusinesses will incur more VAT on theirpurchases than they collect on theirtaxable sales in a given tax period andtherefore should be entitled to claim thedifference from the tax authorities. DoingBusiness data show that OECD highincome economies process VAT refundsthe most efficiently with an average of14.4 weeks to issue a reimbursement(even including some economies wherean audit is likely to be conducted).To analyze tax audits the Doing Businesscase study scenario was expanded toassume that a company made a simpleerror in the calculation of its income taxliability, leading to an incorrect corporateincome tax return and consequently anunderpayment of due income tax liability.The firm discovered the error and voluntarily notified the tax authority. In 74economies—even following immediatenotification by the taxpayer—the error inthe income tax return is likely to triggeran audit. And in 38 economies this errorwill lead to a comprehensive audit of thetax return. OECD high-income economies as well as Europe and Central Asiaeconomies have the simplest processesin place to correct a minor mistake in theincome tax return. For an analysis of thedata for the indicators, see the case studyon paying taxes.GenderThis year for the first time Doing Businessadds gender components to three indicatorsets included in the distance to frontierscore and ease of doing business ranking.These are starting a business, registering property and enforcing contracts.This addition is based on data originally

OVERVIEWcollected by Women, Business and theLaw5 and updated by Doing Business.Why is it important to incorporate a measure of gender differences? First, aroundhalf of the world’s population is femaleand therefore it is important that DoingBusiness measures aspects of regulationthat specifically impact this large group.For some years now the Women, Businessand the Law data have shown, for example, that in some economies a femaleentrepreneur faces more obstacles thanher male counterpart for a variety ofeconomic and business activities. Tothe extent that these obstacles areignored, the Doing Business data will beincomplete. More importantly, over thelast two decades we have learned a greatdeal about the relationship between various dimensions of gender inequality andeconomic growth.6There is ample evidence that thoseeconomies that have integrated womenmore rapidly into the workforce haveimproved their international competitiveness by developing export-orientedmanufacturing industries that tend tofavor the employment of women. For themost part, legal gender disparities havebeen shown to have a strong link withfemale labor force participation.7 Studieshave also shown a clear link betweeneconomic growth and development andfemale labor force participation.8Gender discrimination limits choices andcreates distortions that can lead to lessefficient outcomes. An employer’s decision not to hire a woman based solely onher gender can lead to lower productivityfor that particular firm. Where this practice is widespread it can have negativeeffects at the macro level—an economy’soutput and growth potential can be lowerbecause of gender discrimination.9The Women, Business and the Law teamhas documented and measured the legaldisparities that are relevant to a woman’seconomic empowerment. Economieswhere there are more gender differences(as measured by Women, Business andthe Law) perform worse on average onseveral important economic and socialdevelopment variables: formal years ofeducation for women compared to menare lower, labor force participation ratesfor women compared to men are lower,the proportion of top managers who arewomen is lower, the proportion of womenin parliament is lower, the percentage ofwomen that borrow from financial institutions relative to men is lower and childmortality rates are higher.10Doing Business builds on the work ofWomen, Business and the Law by addinggender components to three indicatorsets this year. Starting a business nowincludes two case studies—one wherethe entrepreneurs are men and onewhere the entrepreneurs are women—inorder to address a previous lack of dataon those economies where women face ahigher number of procedures. Registeringproperty now measures legal genderdifferentiations in property rights forownership, use and transfer. And enforcing contracts was expanded to measurewhether women's and men's testimonyhave th

Cover design: Corporate Visions, Inc. COMPARING BUSINESS REGULATION FOR DOMESTIC FIRMS IN 190 ECONOMIES A World Bank Group Flagship Report Doing Business 2017 Equal Opportunity for All 14TH EDITION. Doing Business 2017 . series of annual re