Economic Policy Review ISSN 1313 - 0544

“Doing Business 2009” – one place back for Bulgaria

Author: Adriana Mladenova / 09.10.2008
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Bulgaria moved one place back, according to the prestigious ranking of the World Bank - Doing Business 2009 and is now on 45th place out of 181 countries. The index assesses the conditions for making business in the different countries according to 10 parameters, which cover the period April 2007 - June 2008. Last year Bulgaria moved 8 places forward as a result of the reforms which were undertaken to improve the business environment through: lower taxes and the possibility to pay "on-line", the introduction of the private bailiffs, which improved the execution of the contracts and reduction of bureaucracy in the area of building supervision. The introduction of the 10% flat tax on personal income and the start up of the electronic company register at the beginning of 2008, however did not help the country to move forward, since in certain areas such as "getting building permits", "registration of property", "protection of the investors' rights", "commerce without borders" the bureaucratic burden is still too high and the country is rated at backward positions compared to the previous year.  

The easiest to do business is in Singapore, New Zeeland and the USA. Ahead of Bulgaria in the rankings are countries such as Azerbaijan, Puerto Rico, Qatar, Botswana, Tonga and Armenia. Close behind Bulgaria are Romania, Portugal, Spain, Luxemburg and Slovenia.  

Where are we lagging behind and in what are we among the best?

On the following figure are shown the scores of Bulgaria for the various parameters, which are included in the index "making business". According to the studies of the World Bank team, our country is fifth in the World where it is the easiest to get credit. We are also in the top half of the ratings according to the parameters "protection of the investors' rights", "registration of ownership", "closing the business" and "enforcement of contracts", but the results in those categories has a lot of room for significant improvements.

Starting up a business in Bulgaria still takes too much time - 49 days, while the requirement for minimal capital (equal to 48% of the average personal income of the population) is an additional obstacle for the entrepreneurs.  Getting a building permit takes on the average 139 days and costs 494% of the average personal income of the population. In comparison - in Singapore the same procedure takes 38 days, in the US - 40 days, in Finland - 38 days and in Korea - 34. In the area of labor laws there is still something to be done in order to make the labor market more flexible. Paying taxes also takes too much time of the business - on the average 616 hours or 77 full working days. Although the tax rates in the country are relatively small, the business is spending resources in filling documents and forms for paying the taxes (including the social security payments) which also must be included when evaluating the tax burden on the business. In Singapore, New Zeeland, Hon Kong, Saudi Arabia, Norway, Estonia, Switzerland and Bahrain payment of taxes takes less than 11 days per year.   

Figure 1: The place of Bulgaria according to different parameters

Source: World Bank, Doing Business 2009

Let us learn from the experience of the others

Last year Bulgaria was selected among to top ten "reformers" for the year. This year the "top ten reformers" of Doing Business 2009 are: Azerbaijan, Albania, Kyrgyzstan, Belarus, Senegal, Burkina Faso, Botswana, Colombia, Dominican Republic and Egypt.  Azerbaijan moved upwards by 64 places to 33rd place, after improving the business environment in seven out of the ten parameters during only one tear. At the beginning of 2008 they introduced "one window" concept for company registration, which reduced by half the time, the expenses and the number of procedures to start a business. As a result the number of newly registered companies was increased by 40% during the first six months of this year. In Azerbaijan there is no requirement for a minimal capital - the same as in 68 other countries!

If we eliminate the requirement of a minimal capital, reduce the time for registering a company from 49 to 30 days and the time for getting a building permit to the realistic 90 days (by providing the entire information, related to building permits, in internet and simplifying the procedures), the documents to register a property will be reduced from 8 to 6 and the time for their preparation - from 19 to 15 days, the days for getting all documents for export and import are reduced to 15 (from respectively 23 and 21 days) and the time for paying taxes is limited on the average to 400 hours, than Bulgaria would be on 31st place in this rankings, or with 14 places forwards![1] All these reforms are realistic and could be done within a year by improving the administrative procedures and eliminating the unnecessary bureaucratic obstacles, more effective administration services and the use of new technologies. All that is required is political will to do it!



[1] We have used the simulator of  Doing Business for reforms. With its help anybody alone could "test" one other package of reforms.