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

64 Doing Business 2009government officer’s estimate, estimatesof incorporation lawyers are used. Ifseveral incorporation lawyers providedifferent estimates, the median reportedvalue is applied. In all cases the cost excludesbribes.Paid-in minimum capitalThe paid-in minimum capital requirementreflects the amount that the entrepreneurneeds to deposit in a bank orwith a notary before registration and upto 3 months following incorporation andis recorded as a percentage of the economy’sincome per capita. The amountis typically specified in the commercialcode or the company law. Many economieshave a minimum capital requirementbut allow businesses to pay only apart of it before registration, with the restto be paid after the first year of operation.In Germany in June 2008, the minimumcapital requirement for limited liabilitycompanies was €25,000, of which at least€12,500 was payable before registration.The paid-in minimum capital recordedfor Germany is therefore €12,500, or42.2% of income per capita. In Serbia theminimum capital requirement was €500,of which only half needed to be paid beforeregistration. The paid-in minimumcapital recorded for Serbia is therefore€250, or 7% of income per capita.The data details on starting a businesscan be found for each economy athttp://www.doingbusiness.org. This methodologywas developed in Djankov andothers (2002) and is adopted here withminor changes.Dealing with constructionpermitsDoing Business records all proceduresrequired for a business in the constructionindustry to build a standardizedwarehouse. These procedures includesubmitting all relevant project-specificdocuments (for example, building plansand site maps) to the authorities; obtainingall necessary clearances, licenses,permits and certificates; completing allTable 12.3What does dealing with construction permits measure?Procedures to legally build a warehouse (number)• Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates• Completing all required notifications and receiving all necessary inspections• Obtaining utility connections for electricity, water, sewerage and a land telephone line• Registering the warehouse after its completion (if required for use as collateral or for transfer of warehouse)Time required to complete each procedure (calendar days)• Does not include time spent gathering information• Each procedure starts on a separate day• Procedure completed once final document is received• No prior contact with officialsCost required to complete each procedure (% of income per capita)• Official costs only, no bribesSource: Doing Business database.required notifications; and receiving allnecessary inspections. Doing Businessalso records procedures for obtainingconnections for electricity, water, sewerageand a fixed land line. Proceduresnecessary to register the property so thatit can be used as collateral or transferredto another entity are also counted (table12.3). The survey divides the process ofbuilding a warehouse into distinct proceduresand calculates the time and costof completing each procedure in practiceunder normal circumstances.Information is collected from expertsin construction licensing, includingarchitects, construction lawyers, constructionfirms, utility service providersand public officials who deal with buildingregulations, including approvals andinspections. To make the data comparableacross economies, several assumptionsabout the business, the warehouse projectand the utility connections are used.Assumptions about theconstruction companyThe business (BuildCo):• Is a limited liability company.• Operates in the economy’s largestbusiness city.• Is 100% domestically and privatelyowned.• Has 5 owners, none of whom is a legalentity.• Is fully licensed and insured to carryout construction projects, such asbuilding warehouses.• Has 60 builders and other employees,all of them nationals with thetechnical expertise and professionalexperience necessary to obtainconstruction permits and approvals.• Has at least 1 employee who is alicensed architect and registered withthe local association of architects.• Has paid all taxes and taken out allnecessary insurance applicable to itsgeneral business activity (for example,accidental insurance for constructionworkers and third-person liabilityinsurance).• Owns the land on which thewarehouse is built.Assumptions about thewarehouseThe warehouse:• Will be used for general storageactivities, such as storage of books orstationery. The warehouse will not beused for any goods requiring specialconditions, such as food, chemicals orpharmaceuticals.• Has 2 stories, both above ground,with a total surface of approximately1,300.6 square meters (14,000 squarefeet). Each floor is 3 meters (9 feet, 10inches) high.• Has road access and is located inthe periurban area of the economy’slargest business city (that is, on thefringes of the city but still within itsofficial limits).(c) The International Bank for Reconstruction and Development / The World Bank