DOING BUSINESS 2009 - JOHN J. HADDAD, Ph.D.

OverviewStarting a businessDealing with construction permitsEmploying workersRegistering propertyGetting creditProtecting investorsPaying taxesTrading across bordersEnforcingcontractsClosing a businessFIGURE 10.1Top 10 reformers in enforcing contractsAverage improvement200720083% 6%ProceduresTimeENFORCING CONTRACTS 491. Mozambique2. Macedonia, former Yugoslav Republic of3. Bulgaria4. Romania5. Armenia6. China7. Bhutan8. Belgium9. Azerbaijan10. PortugalSource: Doing Business database.Tan, a litigation lawyer in Singapore,does not mind waiting at the supremecourt until his case is called. A computerscreen shows the expected wait time forFIGURE 10.1each case. And a text message on his cellTop 10 reformers in enforcing contractsphone will alert him when the judge isAverage improvementready to hear his. Meanwhile, he reviews2007his oral arguments and enjoys a nicelunch at Academy 3% Bistro, 6% located in thesupreme court building.2008 Tan and his clients can afford torelax, because they know their cases willbe resolved expeditiously. In Singaporeit takes only 150 days to resolve a commercialdispute—faster than anywhereelse in the world.Not everyone bringing a commercialdispute to court can expect simi-Procedures Timelar efficiency. One common obstacle todoing business in developing countriesis the weakness of courts. The problem isespecially severe in Africa, where 80% ofthe people turn to informal institutionswhen seeking justice. 1FIGURE Justice 10.5 delayed is often justice denied.And in many countries only therich Time to can enforce afford a contract to (days) go to court. For theMozambiquerest, justice is out of reach. In the absence1,000of efficient 2004courts, firms undertake fewer1. Mozambiqueinvestments and business transactions.800 2. Macedonia, former Yugoslav Republic ofAnd they prefer to involve Nigeria3. Bulgariaonly a small2008group 4. Romania of people who know each otherfrom 600 5. Armenia previous dealings.6. Inefficient China courts impose big costs.A recent 7. Bhutan study on Eastern Europe Mauritania400findsthat 8. Belgium in countries with slower courts,9. Azerbaijanfirms on average have less bank financingfor new investment. Reforms in otherSource: 10. Doing Portugal Business database.areas, such as creditors’ rights, help increaseFIGURE Source: Doing 10.3 bank Business lending database. only if contracts canbe enforced before the courts. 2 A secondstudy, on 41 developing countries, findsthat for each 10% improvement DB2006 in theEastern efficiency Europe of commercial dispute resolution,economies) the informal sector’s share in overall& Central Asia(28economic activity falls by 2.3%. 3Sub-SaharanAfricaCourts serve business best when(46 economies)they are fast, affordable and fair. Worldwide,only 35% of businesses coveredOECDhigh income(24 by economies) the World Bank Democratic Enterprise Surveysbelieve that the courtsRepublicin their countryLatin Americaof Congo& are Caribbean fair, impartial and uncorrupt. 4(32Ghanaeconomies)Doing Business measures Burkina the efficiencyAsiaof the judicial system in resolvingEast Faso& Pacific7(24 a commercialRwandaeconomies) dispute. It looks at the time,cost and procedures to enforce a contractSouth Asiathrough the courts 1 (figure 10.2).Economies that score well on theease of enforcing contracts keep courtsefficient by introducing case management,strict procedural time limitsand specialized commercial courts ore-courts; by streamlining appeals; and bymaking enforcement of judgments fasterand cheaper (table 10.1).In Singapore court documents canbe filed electronically,Democraticand each case ismonitored from the Republic moment the actionof Congois filed until the moment it is finallydecided. Ghana Using case managementBurkinaalsomakes it possible to measure the Faso performanceof Rwanda judges. The right to appealto the high court exists only for casesabove S$50,000 ($35,500). Cases belowthis threshold need prior leave to go toappeal.Hong Kong (China) speeds the enforcementof judgments by allowing theprocess to start based on the essentialsSpecialized commercial courts in Africa help to reduce delays in enforcing contractsFew reforms in the Middle East & North Africa and in South AsiaNumber of reforms easing contract enforcementby Doing Business report yearTable 10.1DB2005 DB2007 DB2008 DB2009FIGURE 10.2Where is enforcing contracts easy—and26where not?Rankings on enforcing contractsFIGURE 10.5are based on 3 subindicatorsSpecialized Easiest commercial Rank Most courts difficult in Africa Rank help to reduce delays in enforcing contractsDays to resolveAttorney, court andTime to enforce a contract (days)Hong Kong, China 1 Cameroon 172commercial 15 sale dispute enforcement costsMozambiqueLuxembourg 2 Congo, Dem. Rep. 173before courtsas % of claim value1,000Iceland 2004 3 Syria 17413Latvia 4 Benin 17533.3% 33.3%Finland 8005 Honduras Nigeria 1762008Time CostUnited States 6 Suriname 17711Norway 7 Bangladesh 178600Korea 8 Angola 17933.3%ProceduresGermany 9 India 180MauritaniaFrance 40010 Timor-Leste 181Note: Rankings are the average of the economy rankings onSteps to file claim, obtain and enforce judgmentthe procedures, time and cost to resolve a commercial dispute(8 economies)through Source: Doing the courts. Business See database. Data notes for details.Note: See Data notes for details.Source: Doing Business database.Middle East &North Africa(19 economies)1FIGURE 10.3FIGURE 10.4Few reforms in the Middle East & North Africa and in South AsiaTop 5 reform features in enforcing(c) The International Bank Note: A reform Reconstruction is counted as 1 reform and per Development reforming economy / The per year. WorldNumber of reforms easing contract enforcementcontractsBankFIGURRankare bDayscommbeforStepsNote: SeFIGURETop 5contraReformIncreasEstablisMade eor moreStream98%SimplifiNote: A reSource: Do