Doing Business 2011: Fastest process of registering property in Azerbaijan

This year Azerbaijan moved forward by one step and positioned the 54th in "Ease of Doing Business" rank in the World Bank (WB) and International Finance Corporation report "Doing Business 2011: Making a Difference for Entrepreneurs". For example, from the CIS countries, Kazakhstan ranked 59th, Belarus - 68th, Russia - 123rd. The report involves 183 countries. Note that last year in the presentation of the report "Doing Business-2010: Reforming in the difficult times", Azerbaijan ranked 38th, but after clarification of some data, within a year, Azerbaijan moved to 55th.

In 2009/2010 companies around the world felt the effects of financial crisis, which began mainly in countries with high income and spread to a much wider range of countries. Some countries suffered from the crisis to a greater extent than others, but the ease or difficulty of establishing and doing business, as well as the effectiveness of courts and insolvency may affect the way how the companies survive in crisis and how quickly they can use the emerging opportunities. The top ten reformers of the world included Singapore, Hong Kong (China), New Zealand, UK, USA, Denmark, Canada, Norway, Ireland and Australia.

The Doing Business Report has been published since 2004, annually adding to the list of criteria based on which a country's rating is compiled. If in 2004 they were only five, the latest research was carried out in 10 directions - starting a business, building permits, hiring and dismissal from work, property registration, getting loans, protecting investors' interests, payment of taxes, registration of export- import operations, ensuring execution of contracts, and closing a business.

Azerbaijan has entered the top 10 countries in the world in terms of the speed of property registration. An individual only needs to pass four procedures, which total cost 0.2 percent of the property cost, to register property in Azerbaijan. The procedures take only 11 days.

Rating of easiness of business in Azerbaijan as a result of year

Effort

Doing Business 2011

Doing Business 2010

Doing Business 2009

Doing Business 2008

Doing Business 2007

Easiness of business

54

55

33

96

99

Starting a Business

15

17

11

64

95

Dealing with construction permits

160

157

155

159

159

Registering property

10

8

9

56

58

Getting credit

46

44

12

26

21

Protecting investors

20

20

19

107

105

Paying taxes

103

107

103

141

142

Trading across borders

177

178

176

173

170

Enforcing contracts

27

27

25

30

30

Closing a business

88

85

84

75

71

Starting a Business (15th)

Compared with the countries of the region and the OECD, in Azerbaijan there is almost equal number of procedures for starting a business, but unlike other countries in the region, to start a business in Azerbaijan is cheaper. Yes, and the registration of the business in Azerbaijan takes short time - only 8 days: obtain a confirmation of the legal address of the company from the proposed lessor (1 day, no charge), notarize company documents (1 day, AZN 30), open a temporary bank account, deposit the charter capital and obtain a receipt; pay the state registration fee and get a receipt (1 day, AZN 31), file documents with the company registrar at the One Stop shop Taxes, register for VAT purposes (3 days, no charge), obtain a company seal (1 day AZN 22), open a permanent bank account (1 day, AZN 30).

In January 2008 a new "single window" system was set up in Azerbaijan to register newly-founded enterprises which enabled to reduce number of necessary procedures to seven and reduce expense for this purpose twice. This system much simplified the registration of new business. The functions of the new system were trusted on the Taxes Ministry of Azerbaijan.

Indicators

Azerbaijan

Region

OECD

Procedures (number)

6

6,3

5,6

Time (days)

8

16,3

13,8

Cost (% of income per capita)

3,1

8,5

5,3

Minimum charter capital (%of income per capita)

0,0

12,3

15,3

 

Dealing with Construction Permits (160th)

This section reflects the procedures, time and cost needed to build a warehouse, including obtaining necessary licenses and permits, completing required notifications and inspections, and obtaining utility connections. On this point, the business of Azerbaijan much cedes to the OECD countries and other countries in the region.

Indicators

Azerbaijan

Region

OECD

Procedures (number)

31

22,2

15,8

Time (days)

207

250,1

166,3

Cost (% of income per capita)

388,9

645,5

62,1

Registering property (10th)

Among the nine figures, according to which the report's authors estimate the business climate in the countries of the world, the most advanced in Azerbaijan is considered a system of property registration. Major role in this was played by the innovation in the Azerbaijani legislation, on which were introduced new fees for accelerating the consideration and issuance of documents certifying the right to own property. The country has established new single registry recording real estate transactions, which reduced the number of procedures to register property from seven to four. In addition, the State Registry Service began to provide an opportunity to accelerate two of these four procedures that can arrange registration of the property within 11 days.

Indicators

Azerbaijan

Region

OECD

Procedures (number)

4

5,6

4,8

Time (days)

11

38,3

32,7

Cost (% of income per capita)

0,2

2,4

4,4

Getting credit (46th)

This table shows the degree of accessibility of credit information and legal rights of lenders and borrowers. Legal Rights Index presents a scale from 0 to 10, with higher scores indicating that those laws are better designed to expand access to credit. Credit Information Index measures the scope, accessibility and quality of credit information available through public registries or private bureaus. According to Doing Business 2011, Azerbaijan has significantly improved communication system in this field and access to loans by creating an online platform - state loan register, which enables the financial institutes to offer and receive data on loans. However, Azerbaijan still lacks private loan bureaus, which makes ascending on this indicator almost impossible.

Indicator

Azerbaijan

Region

 OECD

Legal Rights Index

6

6,6

6,9

Credit Information Index

5

4,0

4,7

Number of people registered in state registry (% of population)

7,0

13,1

8,0

Number of people registered at Private bureau (% of population)

0,0

21,3

61,0

Protecting investors' interests (20th place)

Ranking the 20th in this index was possible due to additions and changes to the Civil Code of Azerbaijan adopted by the Parliament last year based on suggestions from the Ministry of Economic Development and the State Securities Committee.

Indicators

Azerbaijan

Region

OECD

Extent of disclosure index

7

6,3

6,0

Extent of director liability index

5

4,0

5,2

Ease of shareholder suits index

8

6,2

6,8

Strength of investor protection index

6,7

5,5

6,0

Paying taxes (103rd )

The indicator reflects the total number of taxes and contributions paid, the method of payment, the frequency of payment and the number of agencies involved for a standardized case during the second year of operation. Also it takes into account the administrative burden associated with paying taxes and reducing tax rates on corporate income. In this procedure, Azerbaijan has good indicators.

Indicators

Azerbaijan

Region

OECD

Payments (number per year)

18

41,7

14,2

Time (hours per year)

306

313,9

199,3

Profit tax (%)

13,8

9,8

16,8

Labor tax and contributions (%)

24,8

22,9

23,3

Other taxes (%)

2,2

8,5

3,0

Total tax rate (%)

40,9

41,2

43,0

Trading across borders (177th)

The fact that Azerbaijan is still on the last steps in the ranking of Doing Business in the indicator of trade across borders is linked with the fact that the reforms in the customs have long-term effect. According to the table, despite the reforms in Azerbaijan, particularly the introduction of "single window" at the customs offices, the processes of exports and imports remain complicated.

Indicators

Azerbaijan

Region

OECD

Documents to export (number)

9

6,4

4,4

Time to export (days)

43

26,7

10,9

Cost to export (US$ per container)

2 980

1651,7

1058,7

Documents to import (number)

14

7,6

4,9

Time to import (days)

46

28,1

11,4

Cost to import (US$ per container)

3480

1 845,4

1106,3

Enforcing Contracts (27th)

Indicators on enforcing contracts measure the efficiency of the judicial system in resolving a commercial dispute. The data are built by following the stepby- step evolution of a commercial sale dispute before local courts. The data are collected through study of the codes of civil procedure and other court regulations as well as surveys completed by local litigation lawyers and by judges. The ranking on the ease of enforcing contracts is the simple average of the percentile rankings on its component indicators.

Indicators

Azerbaijan

Region

OECD

Procedures (number)

39

37,3

31,2

Time (days)

237

402,2

517,5

Cost (% of claim)

18,5

26,7

19,2

Closing a business (88th)

This section deals with temporary and financial expenses related to bankruptcy procedures and provide with measurements for gaps in bankruptcy legislation. It also indicates co-efficiency of loan penalty, given in cents per dollar obtained from insolvent firm.

Indicator

Azerbaijan

Region

OECD

Time (years)

2.7

2.9

1.7

Cost (% of estate)

8

13.4

9.1

Recovery rate (cents on the dollar)

28.8

32.6

69.1

 

Conclusion

According to Doing Business 2011 "Improving terms for entrepreneurship", Azerbaijan has efficiently held reforms in 2009-2010 in the fields such as issuing loans and tax payment. In particular, Azerbaijan improved access to loans by creating online platform - a state loan register, enabling the financial institutes to offer and receive data about loans. At the same time, changes injected into the Tax Code promoted cut in some rates, including profit tax rate, and facilitated paying corporate income tax and VAT.

More problematic fields for Azerbaijan, pulling down the country in the rating, but are on the stage of reforming, include procedures of licensing construction, particularly, a problem of reducing term of procedures in construction sector; international trade and simplifying procedures for closing business. Reforms held several years ago now are bringing their results and the current reforms in this fields will continue hence to create more favorable conditions for Azerbaijani entrepreneurs engaged in international trade and construction sector.

Nevertheless, Azerbaijan keeps one of the leading places in East Europe and Central Asia for doing business. Azerbaijan has chances to hope for essential rise in its rating in Doing Business 2012 if reforms are carried out in the fields which the country lagged in the current rating and continue improving procedures on other indices.

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