Professional Documents
Culture Documents
2007
Starting a business Dealing with licenses Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a business
2008
Update of 2007 Add 3 countries Reformers Club: 11 case studies
2009
Add Not paying bribes Add Using infrastructure Research program on regulation and business opportunities for women
Singapore Hong Kong, China Japan Thailand Malaysia Korea Brunei China Vietnam India Indonesia Philippines Cambodia Lao PDR
20% 6 5 4 3 2 5% 1 0
Register at the GUIDE Apply for license, tax and statistical IDs Publish a notice in a daily newspaper File forms with the National Social Security Fund File for health insurance
15%
10%
0%
1. Follow the entrepreneur from the beginning to the end of a basic transaction; 2. Record every step of the process, and the associated time and cost; 3. Gather all the relevant laws, regulations, decrees, fee schedules.
All procedures that are required in law or in practice for an entrepreneur to start up and formally operate an industrial or commercial business, including:
Preregistration (name verification, notarization) Registration of the company Postregistration (social security, tax, company seal)
Starting a business: The company Is a limited liability company; Operates in Kuala Lumpur and does not engage in foreign trade; Has 5 owners who are all Malaysian nationals; Performs general industrial or commercial activities such as the production or sale of goods or services to the public (not subject to special tax regime and no heavily polluting processes); Leases its commercial plant and offices and does not own any real estate; Does not qualify for investment incentives or special benefits; Has at least 10 and up to 50 employees 1 month after the commencement of operations, all of them Malaysian nationals; Has start-up capital of 10 times income per capita at the end of 2006 (approx. 183,000 MYR); Has a turnover of at least 100 times income per capita; Has a company deed 10 pages long.
Time (days):
Median duration, recorded in calendar days; A procedure has a minimum duration of 1 day; Procedures may take place simultaneously but cannot begin the same day; If procedure can be accelerated for a cost, the fastest procedure is recorded; Each procedure starts with the first filing of the application or demand, and ends once the company has received the final document or service requested;
Paid-in capital:
Before registration and up to 3 months following registration; measured as percentage of GNI per capita.
Starting a business in Malaysia: 9 procedures, 24 days, 18.1% of Starting a business in Malaysia: income per capita
1. Australia 2. Canada 3. New Zealand 4. United States 5. Ireland 6. United Kingdom 7. Puerto Rico 8. Mauritius 9. Singapore 10. Georgia
Minimum capital requirement nominal or zero Standardized forms No courts involved Online registration Fixed registration fee No publication in legal journal required
All procedures that are required in law or in practice to build a standardized warehouse, up to the point that the property can be used as collateral or transferred.
Dealing with licenses: The construction company (BuildCo) Is a limited liability company operating in Kuala Lumpur; Has 5 owners who are all Malaysian nationals; Is fully licensed and insured to construct buildings; Leases its commercial plant and offices and does not own any real estate; Has 20 employees, all Malaysians with the necessary technical and professional expertise to obtain construction permits & approvals; Has at least 1 employee who is a locally registered licensed architect; Has paid all taxes and taken out all insurance necessary to its business activity (e.g. accident insurance for workers and liability insurance); Owns the land on which the warehouse is built.
Dealing with Licenses: The warehouse Has road access and is located on the edge of Kuala Lumpur, but within city limits; Is 2 stories high and covers an area of 1,300.6 square meters. Each floor is 3 meters high; Is located on a land plot of 929 square meters, which is 100% owned by the construction company (BuildCo) and is accurately registered in the cadastre and land registry; Is a new construction; Has complete architectural and technical plans and is already insured; Will be connected to electricity, water, sewerage and one land phone line. The connection to each utility network will be 10 meters long; Will be used for general storage, such as storing books or stationery; Will include all technical equipment required to make the warehouse fully operational.
Time (days)
Median duration, recorded in calendar days; A procedure has a minimum duration of 1 day; Procedures may take place simultaneously but cannot begin the same day; If procedure can be accelerated for a cost, the fastest procedure is recorded; Each procedure starts with the first filing of the application or demand, and ends once the company has received the final document or service requested;
1. St. Vincent and the Few pre-approval procedures required before obtaining a Grenadines building permit 2. New Zealand Interaction with one agency to 3. Belize obtain a building permit rather 4. Marshall Islands than following up with different offices and agencies 5. Singapore 6. Denmark 7. St. Kitts and Nevis 8. Maldives 9. Kenya 10. Micronesia Few inspections of the construction site by the authorities
All procedures that are required in law or in practice to transfer property title, up to the point that the property can be used as collateral or transferred.
Are limited liability companies; Located on the outskirts of Kuala Lumpur; Privately owned by Malaysian nationals; Have 50 employees each, all Malaysian nationals; Perform general commercial activities.
Time (days)
Recorded in calendar days Captures the median duration of each procedure Minimum time for each procedure is 1 day
Registering property in Malaysia: 5 procedures, 144 days, 2.4% of income per capita
2. Memorandum of Transfer (14A) sent to Stamp Office for adjudication of Stamp Duty (1 day)
1. New Zealand 2. Saudi Arabia 3. Armenia 4. Lithuania 5. Slovakia 6. Norway 7. Sweden 8. Iceland 9. United Arab Emirates 10. United States
Reduce taxes or fees Speed procedures in the registry Computerize procedures and go online Combine and reduce procedures Speed procedures in the court Liberalize professions like surveyors, valuers and notaries
Cost (US dollars) All official fees for import and export; Does not include tariffs or trade taxes.
18 days US$432
Import 7 documents
Bill of lading Cargo release order Certificate of origin Commercial invoice Customs import declaration Packing list Terminal handling receipts
14 days US$385
Trade documentation in Malaysia and the top 10 economies in overall ease of doing business
1. Singapore 2. Denmark 3. Hong Kong, China 4. Norway 5. Finland 6. Sweden 7. Estonia 8. Israel 9. Panama 10. Germany
Reduce paperwork Use a single window Allow shippers to declare their manifest online even prior to arriving in port Limit physical inspections
Time (hours per year) Hours per year to prepare, file and pay three major types of taxes: Corporate income tax; VAT or sales tax; Labor taxes; Preparation time, filing time and payment time;
Total tax rate: Total amount of taxes payable as a percentage of commercial profits, generally: profit or corporate income tax; social contributions and labor taxes paid by the employer; property taxes, turnover and other taxes.
Paying taxes in Malaysia: 35 payments, 166 hours, 32.6% total tax rate
35 27 15
Number of tax payments in Malaysia compared with East Asia Pacific Region and OECD
1. Maldives 2. Singapore 3. Hong Kong, China 4. United Arab Emirates 5. Oman 6. Ireland 7. Saudi Arabia 8. Kuwait 9. New Zealand 10. Kiribati
Online filing One tax per tax base Low rates and wide tax base Simplify tax administration
Scoring Indicators
Is a limited liability company; Operates in Kuala Lumpur; Is 100% Malaysian-owned; Operates in the manufacturing sector; Has 201 employees; Is subject to collective bargaining agreements in countries where such agreements cover more than half of the manufacturing sector and apply even to firms not party to them; Abides by every law and regulation but does not grant workers more benefits than what is legally mandated.
Is a non-executive, full-time male employee who has worked in the same company for 20 years, and is now 42 years old; Earns a salary plus benefits equal to the countrys average wage; Is a lawful citizen who belongs to the same race and religion as the majority of the countrys population; Resides in Kuala Lumpur; Is not a member of a labor union, unless membership is mandatory.
Employing workers measures: 1. Rigidity of employment index (0-100), the average of: Difficulty of hiring index (0-100) fixed term contracts, minimum wage Rigidity of hours index (0-100) provisions relevant to non-standard work schedules and annual leave Difficulty of firing index (0-100) required procedures for redundancy Firing cost (weeks of salary) Notice periods and severance pay for a redundant worker (in weeks of salary) plus 3. Non-wage labor cost (% of salary) Labor taxes payable by employer (% of workers wage)
2.
Does the law prohibit the use of fixed-term contracts for permanent tasks (Yes/No)?
0 or 1
5 years = 0 3-5 years = 0.5 <3 years = 1 <0.25 = 0 0.25-0.5 = 0.33 0.5-0.75 = 0.67 >0.75 = 1 0-100
What is the ratio of the minimum wage of a trainee/first-time employee to the average value added per worker? Difficulty of Hiring Index
Yes/No
No
Yes/No
No
Yes/No
No
Can the workweek exceed 50 hours (including overtime) for 2 months a year? Is a worker automatically entitled to more than 21 working days of paid annual vacation?
Yes/No
No
Yes/No
No
0-100
Firing (i.e. retrenchment) costs: Comparing Malaysia and the top 10 in overall ease of doing business
1. United States 2. Singapore 3. Marshall Islands 4. Georgia 5. Brunei 6. Tonga 7. Maldives 8. Australia 9. Palau 10. Denmark
Fixed-term contracts allowed without limit for permanent tasks Limited restrictions on night-time or weekly-holiday work Firing costs do not exceed the equivalent of two months salary No third-party approval required to dismiss workers and no priority rules in place Non-wage labor costs do not exceed 20%
Getting credit indicators Legal rights index: 10 features of collateral/secured transactions law Credit information index: 6 features of credit information system plus Public credit registry coverage: Number of individuals and firms Percentage of adult population Private credit bureau coverage: Number of individuals and firms Percentage of adult population
4. 5. 6.
Answers for Malaysia are in bold. Public Registry Coverage equals 44.5% of adult population.
1. United Kingdom 2. Hong Kong, China 3. Australia 4. Germany 5. Malaysia 6. New Zealand 7. Canada 8. Israel 9. Singapore 10. United States
Record positive and negative credit history Gather historical credit information going back at least 2 years, of both individuals and companies Utilities or retailers as well as banks provide credit information Allow all types of assets to be used as collateral Unified collateral registry Out-of-court enforcement of security rights
Mr. James Mr. James owns 60% of Buyer Co. shares, sits on its board of directors Mr. James owns 90% of Seller Co. shares
Buyer Co.
Strength of investor protection: average of the three indices Malaysias score: 8.7
1. New Zealand 2. Singapore 3. Hong Kong, China 4. Malaysia 5. Canada 6. Israel 7. United States 8. Ireland 9. South Africa 10. United Kingdom
Regulate approval of related-party transactions; Require extensive internal and external disclosure requirements for relatedparty transactions; Facilitate shareholder judicial redress for damage caused to company through self-dealing; Greater remedies against directors involved in harmful related-party transactions; Open company books for shareholder inspection.
The Premise: Seller and Buyer are two businesses located in Kuala Lumpur. Seller sells and delivers goods worth 200% of income per capita to Buyer, who refuses to pay disputing the quality of the goods. Seller sues Buyer in Kuala Lumpur Sessions Court (Mahkamah Sesyen Kuala Lumpur).
The claim equals 200% of income per capita (approx. 36,700 MYR); Seller attaches Buyers goods prior to obtaining judgment; Expert opinions are given on the quality of the goods; the parties each call an expert witness or the judge appoints an independent expert; Seller wins the case and Buyer does not appeal; Seller immediately moves to enforce the judgment through a public sale of Buyers movable assets (e.g. office equipment).
Procedures (number): Service of process; Trial and judgment; Enforcement of judgment through public sale of buyers movable goods; Measures procedures applicable to either civil or common law jurisdictions; Time (calendar days) Service of process; Trial and judgment; Enforcement of judgment through public sale of buyers movable goods; Includes waiting period between actions; Cost (% of value of claim) Court costs + average attorneys fees + enforcement fees Ease of Enforcing Contracts = Average of Rank on Time, Rank on Cost and Rank on Procedures)
Procedures (number) Duration (days) Filing and service Trial and judgment Enforcement of judgment Cost (% of claim)* Attorney cost (% of claim) Court cost (% of claim) Enforcement Cost (% of claim)
1. Hong Kong, China 2. Luxembourg 3. Latvia 4. Iceland 5. Singapore 6. Austria 7. Finland 8. United States 9. Norway 10. Korea
Specialized commercial courts Changes to procedural rules More efficient enforcement of judgments Introduce out-of-court enforcement of small or uncontested claims
Time: How many years does it take to put the company through the bankruptcy process? Cost: What percentage of the estate value is spent going through the bankruptcy process? Recovery rate: How many cents on the dollar can claimants creditors, tax authorities and employees recover from the insolvent company?
42%
38%
36%
13%
12%
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1. Japan 2. Singapore 3. Norway 4. Canada 5. Finland 6. Ireland 7. Denmark 8. Netherlands 9. Belgium 10. United Kingdom
Establish creditors committees Increase creditors priority ranking Allow pre-insolvency proceedings Reduce time limits Minimize court involvement
Thank You
For more information, or if you would like to become a Doing Business contributor, please visit www.doingbusiness.org or contact us directly: Sylvia Solf: ssolf@worldbank.org Justin Yap: jyap1@worldbank.org