Public Disclosure Authorized. Public Disclosure Authorized. Ethiopia. Public Disclosure Authorized. Public Disclosure Authorized

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Ethiopia

2 2010 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC Telephone Internet All rights reserved A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone ; fax ; Internet All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher,The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax ; pubrights@worldbank.org. Additional copies of 2011: Making a Difference for Entrepreneurs, 2010: Reforming through Difficult Times, 2009, 2008, 2007: How to Reform, in 2006: Creating Jobs, in 2005: Removing Obstacles to Growth and in 2004:Understanding Regulations may be purchased at ISBN: E-ISBN: DOI: / ISSN: Library of Congress Cataloging-in-Publication data has been applied for. Printed in the United States

3 Current features News on the project Rankings How economies rank-from 1 to Reformers Short summaries of DB2011 reforms, lists of reformers since DB2004 and a ranking simulation tool Historical data Customized data sets since DB Methodology and research The methodologies and research papers underlying Download reports Access to reports as well as subnational and regional reports, reform case studies and customized country and regional profiles Subnational and regional projects Differences in business regulations at the subnational and regional level Law Library Online collection of business laws and regulations relating to business and gender issues Contents Introduction and Aggregate Rankings 5 - Year Measure of Cumulative Change Starting a Business Dealing with Construction Permits Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Closing a Business 2011 Business Reforms Local partners More than 8,200 specialists in 183 economies who participate in Business Planet Interactive map on the ease of doing business

4 2011 : Making a Difference for Entrepreneurs is the eighth in a series of annual reports investigating regulations that enhance business activity and those that constrain it. presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe, over time. A set of regulations affecting 9 stages of a business s life are measured: starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in 2011 are current as of June 1, 2010*. The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why. The methodology has limitations. Other areas important to business such as an economy s proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions, are not studied directly by. To make the data comparable across economies, the indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policymakers in designing reform. The data set covers 183 economies: 46 in Sub-Saharan Africa, 32 in Latin America and the Caribbean, 25 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 18 in the Middle East and North Africa and 8 in South Asia, as well as 30 OECD high-income economies. The following pages present the summary indicators for Ethiopia. The data used for this economy profile come from the database and are summarized in graphs. These graphs allow a comparison of the economies in each region not only with one another but also with the good practice economy for each indicator. The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good-practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10. More information is available in the full report : Making a Difference for Entrepreneurs presents the indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with information on ordering the report, are available on the website ( * Except for the Paying Taxes indicator that refers to the period January to December of Note: data and rankings have been recalculated to reflect changes to the methodology and the addition of new economies (in the case of the rankings). 1

5 Economy Rankings - Ease of Ethiopia is ranked 104 out of 183 economies. Singapore is the top ranked economy in the Ease of. Ethiopia - Compared to global good practice economy as well as selected economies: Ethiopia's ranking in 2011 Rank 2011 Ease of 104 Starting a Business 89 Dealing with Construction Permits 53 Registering Property 109 Getting Credit 128 Protecting Investors 120 Paying Taxes 47 Trading Across Borders 157 Enforcing Contracts 57 Closing a Business 82 2

6 Summary of Indicators - Ethiopia Starting a Business Procedures (number) 5 Time (days) 9 Cost (% of income per capita) 14.1 Min. capital (% of income per capita) Dealing with Construction Permits Procedures (number) 12 Time (days) 128 Cost (% of income per capita) Registering Property Procedures (number) 10 Time (days) 41 Cost (% of property value) 2.1 Getting Credit Strength of legal rights index (0-10) 4 Depth of credit information index (0-6) 2 Public registry coverage (% of adults) 0.1 Private bureau coverage (% of adults) 0.0 Protecting Investors Extent of disclosure index (0-10) 4 Extent of director liability index (0-10) 4 Ease of shareholder suits index (0-10) 5 Strength of investor protection index (0-10) 4.3 Paying Taxes Payments (number per year) 19 Time (hours per year) 198 Profit tax (%) 26.8 Labor tax and contributions (%) 0.0 Other taxes (%) 4.3 Total tax rate (% profit) 31.1 Trading Across Borders Documents to export (number) 8 Time to export (days) 44 Cost to export (US$ per container) 1890 Documents to import (number) 8 Time to import (days) 45 Cost to import (US$ per container)

7 Enforcing Contracts Procedures (number) 37 Time (days) 620 Cost (% of claim) 15.2 Closing a Business Recovery rate (cents on the dollar) 31.3 Time (years) 3.0 Cost (% of estate) 15

8 The 5 year measure of cumulative change illustrates how the business regulatory environment has changed in 174 economies from 2006 to Instead of highlighting which countries currently have the most business friendly environment, this new approach shows the extent to which an economy s regulatory environment for business has changed compared with 5 years ago. This snapshot reflects all cumulative changes in an economy s business regulation as measured by the indicators-such as a reduction in the time to start a business thanks to a one-stop shop or an increase in the strength of investor protection index thanks to new stock exchange rules that tighten disclosure requirements for related-party transactions. This figure shows the distribution of cumulative change across the 9 indicators and time between 2006 and Doing business has become easier (DB change score) Rwanda Egypt, Arab Rep. Ethiopia Kenya Eritrea

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10 1. Benchmarking Starting a Business Regulations: Ethiopia is ranked 89 overall for Starting a Business. Ranking of Ethiopia in Starting a Business - Compared to good practice and selected economies: 7

11 The following table shows Starting a Business data for Ethiopia compared to good practice and comparator economies: Good Practice Economies Procedures (number) Time (days) Cost (% of income per capita) Min. capital (% of income per capita) Denmark* 0.0 New Zealand* Selected Economy Ethiopia Comparator Economies Egypt, Arab Rep Eritrea Kenya Rwanda * The following economies are also good practice economies for : Procedures (number): Canada Cost (% of income per capita): Slovenia 8

12 2. Historical data: Starting a Business in Ethiopia Starting a Business data Rank Procedures (number) Time (days) Cost (% of income per capita) Min. capital (% of income per capita) The following graphs illustrate the Starting a Business sub indicators in Ethiopia over the past 4 years: 9

13 Starting a Business Summary - Ethiopia This table summarizes the procedures and costs associated with setting up a business in Ethiopia. STANDARDIZED COMPANY Legal Form: Private Limited Company (PLC) City: Addis Ababa Registration Requirements: No: Procedure Time to complete Cost to complete 1 Check the company name for uniqueness 1 no charge 2 Authentication of the company documents at the office of registration 2 ETB 390 of Acts and documents 3 Register the company document at the Commercial Register and 1 ETB 85 obtain the trade license 4 Register with Ethiopian Inland Revenue Authority and Customs for 2 no charge income tax and VAT 5 Make a company seal 3 ETB

14 Starting a Business Details - Ethiopia Procedure 1 Check the company name for uniqueness Time to complete: 1 Cost to complete: Comment: no charge Checking for the uniqueness of the company name is mandatory according to Article 19 of the Proclamation 67/1997. The search is conducted at the Ministry of Trade and Industry. The party completes a simple form and hands it over to the agent at window #1. The service is fully computerized and the search is quick. A Letter of Recommendation (LR) will be given by the agent andmust be attached to the Memorandum and Articles of Association for authentication. The following names are rejected: Same name in the same field are not accepted. Names which are antagonistic to moral issues Names advertising like fastest way to transfer money Best services in town such adjectives are not accepted. Procedure 2 Evidence of capital deposit is not required for private limited companies. However, the memorandum of association should show that the capital is fully paid in cash or in kind. In practice, as long as the memorandum of association indicates that the capital is fully paid, demonstration of actual payment is not required. Authentication of the company documents at the office of registration of Acts and documents Time to complete: 2 Cost to complete: ETB 390 Comment: Procedure 3 According to Proclamation 334/2003, Article 5, the Memorandum and Articles of Associations must be authenticated. The party will deposit the documents and will be given an appointment for the next day. This office will check the following: In case of contribution in kind, this office will verify that the value stated in the Memorandum is correct. Stamp duty is a flat rate of 350 ETB (Proclamation 110/1998). Payment of stamp duty is done in the same office where the documents are being registered in the books prior to its authentication. All partners are required to sign in front of the public Notary. The Office of the registration of Acts and Documents serves mainly to provide notary public services. The applicants appear in person at the appointed date, with an original copy of their letter of appointment (power of attorney) and a valid identity card. The officer checks the validity of the documents, the authenticity of the signatures, and the genuineness of the identity cards. The applicants sign the documents in front of an officer, and pay a stamp duty of ETB 350 and another service charges of 10 ETB ( 4 copies of Memorandom of Association). Register the company document at the Commercial Register and obtain the trade license Time to complete: 1 Cost to complete: ETB 85 Comment: The applicant registers the Memorandum and Articles of Association and request a trade license. after reviweing the documents, the Commercial register delivers a registration certificate and the 11

15 appropriate license. Companies are encouraged to register to the Regional Trade & Industry bureau closest to their business. These bureaus have the power to issue the registration and license to newly registered businesses. Procedure 4 Payment is done at the same time.the fees depend on the company's registered capital. If the company has a registered capital of ETB 15,000, the registration fee is ETB 15, the licensing fee is ETB 35, forms and cards cost ETB 12, and stamps cost Birr 10. If the company's registered capital is ETB 200,000, the registration fee is ETB 100, the licensing fee is ETB 200, and the costs of forms and cards and stamps remain ETB 12 and ETB 10, respectively. Register with Ethiopian Inland Revenue Authority and Customs for income tax and VAT Time to complete: 2 Cost to complete: Comment: Procedure 5 no charge A newly established firm must register for income tax, payable at the end of the company s fiscal year, and pay municipal and license renewal fees and withholding taxes on their employees. Once registred, the Tax Identification Number (TIN) is provided along with the VAT certificate. Make a company seal Time to complete: 3 Cost to complete: ETB 100 Comment: While the law does not specifically require a company to have a seal, its required in practice. 12

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17 1. Benchmarking Dealing with Construction Permits Regulations: Ethiopia is ranked 53 overall for Dealing with Construction Permits. Ranking of Ethiopia in Dealing with Construction Permits - Compared to good practice and selected economies: 14

18 The following table shows Dealing with Construction Permits data for Ethiopia compared to good practice and comparator economies: Good Practice Economies Procedures (number) Time (days) Cost (% of income per capita) Denmark 6 Qatar 0.8 Singapore 25 Selected Economy Ethiopia Comparator Economies Egypt, Arab Rep Eritrea no practice no practice no practice Kenya Rwanda

19 2. Historical data: Dealing with Construction Permits in Ethiopia Dealing with Construction Permits data Rank Procedures (number) Time (days) Cost (% of income per capita) The following graphs illustrate the Dealing with Construction Permits sub indicators in Ethiopia over the past 4 years: 16

20 Dealing with Construction Permits in Ethiopia The table below summarizes the procedures, time, and costs to build a warehouse in Ethiopia. BUILDING A WAREHOUSE City: Addis Ababa Registration Requirements: No: Procedure Time to complete Cost to complete 1 Obtain design approval 60 days ETB 10,000 2 Obtain consent from neighbors and submit it to municipality 3 days no charge 3 Obtain bank statement 1 day no charge 4 Obtain approval of construction 30 days ETB Request and receive excavation inspection from municipality 1 day no charge 6 Request and receive mid-construction inspection 1 day no charge 7 Request electricity connection from EEPCo 1 day ETB 20 8 Receive electricity inspection from EEPCo 1 day no charge 17

21 9 Obtain electricity connection from EEPCo 28 days ETB * Request water and sewage connection from WSSA 1 day no charge 11 Obtain water and sewage connection from WSSA 29 days ETB 4, * Obtain telephone connection from ETC 30 days ETB 2,000 * Takes place simultaneously with another procedure. 18

22 Dealing with Construction Permits Details - Ethiopia Procedure 1 Obtain design approval Time to complete: 60 days Cost to complete: ETB 10,000 Agency: Comment: Procedure 2 Municipality (Subcity Building Permit process) The agency involved is the Building Design Department, which is part of the municipality. BuildCo will submit the building plans and will receive a form to be filled out by the owners of the neighboring plots. BuildCo must obtain the neighbors consent before obtaining the design approval. Obtain consent from neighbors and submit it to municipality Time to complete: Cost to complete: Agency: Comment: 3 days no charge Municipality (Subcity) The company must get a written statement from the neighbors, stating that there are no land disputes on the plot where the warehouse will be built. Procedure 3 Obtain bank statement Time to complete: Cost to complete: Agency: Comment: 1 day no charge Commercial Bank BuildCo must show proof of sufficient funds to build the warehouse. A commercial bank can provide this proof if the company has enough funds in its bank account or if the company is able to obtain a loan. Procedure 4 Obtain approval of construction Time to complete: 30 days Cost to complete: ETB 600 Agency: Comment: Procedure 5 Municipality After the design is approved, the company must submit the bank statement described above and check the zoning requirements to obtain approval for the construction. After this approval is granted, construction can begin. Request and receive excavation inspection from municipality Time to complete: Cost to complete: 1 day no charge 19

23 Agency: Comment: Procedure 6 Municipality At the beginning of the construction, BuildCo must inform the municipality (by phone) about the initial stages of construction. The municipality checks whether the work has been performed according to plan. The wait period between requesting and receiving the inspection depends on the inspectors availability. Once the permit is obtained, inspections will occur occasionally without affecting the work. Request and receive mid-construction inspection Time to complete: Cost to complete: Agency: Comment: 1 day no charge Municipality During construction, the municipality can randomly inspect the building. Procedure 7 Request electricity connection from EEPCo Time to complete: 1 day Cost to complete: ETB 20 Agency: Ethiopian Electric Power Corporation (EEPCo) Comment: Procedure 8 Receive electricity inspection from EEPCo Time to complete: Cost to complete: Agency: 1 day no charge Ethiopian Electric Power Corporation (EEPCo) Comment: Procedure 9 Obtain electricity connection from EEPCo Time to complete: 28 days Cost to complete: ETB 500 Agency: Ethiopian Electric Power Corporation (EEPCo) Comment: Procedure 10 Request water and sewage connection from WSSA Time to complete: 1 day 20

24 Cost to complete: Agency: no charge Water Supply and Sewage Authority (WSSA) Comment: Procedure 11 Obtain water and sewage connection from WSSA Time to complete: 29 days Cost to complete: ETB 4,000 Agency: Water Supply and Sewage Authority (WSSA) Comment: Procedure 12 Obtain telephone connection from ETC Time to complete: 30 days Cost to complete: ETB 2,000 Agency: Ethiopian Telecommunications Corporation (ETC) Comment: 21

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26 1. Benchmarking Registering Property Regulations: Ethiopia is ranked 109 overall for Registering Property. Ranking of Ethiopia in Registering Property - Compared to good practice and selected economies: 23

27 The following table shows Registering Property data for Ethiopia compared to good practice and comparator economies: Good Practice Economies Procedures (number) Time (days) Cost (% of property value) New Zealand* 2 Norway* 1 Saudi Arabia 0.0 Selected Economy Ethiopia Comparator Economies Egypt, Arab Rep Eritrea Kenya Rwanda * The following economies are also good practice economies for : Procedures (number): United Arab Emirates Time (days): Saudi Arabia, Thailand, United Arab Emirates 24

28 2. Historical data: Registering Property in Ethiopia Registering Property data Rank Procedures (number) Time (days) Cost (% of property value) The following graphs illustrate the Registering Property sub indicators in Ethiopia over the past 4 years: 25

29 Registering Property in Ethiopia This topic examines the steps, time, and cost involved in registering property in Ethiopia. STANDARDIZED PROPERTY Property Value: 203, City: Addis Ababa Registration Requirements: No: Procedure Time to complete Cost to complete 1 Verify the owner of the property and obtain the Carta and plan at the sub-city office 2 days 200 ETB 2 Evaluation of the sale price by the sub-city 1 day no cost 3 The seller must obtain tax clearance from Tax Authorities 2 days no cost 4 Obtain water utility clearance from the local Water Company 1 day no cost 5 Obtain energy utility clearance from the local Energy Company 1 day no cost 6 Payment of capital gains tax at Inland Revenue Service 1 day not counted 7 Request the execution of the sale contract at the office of Documents Authentication and Registration 1 day 10 ETB for the service charge + 55 ETB for the power of attorney 26

30 8 Payment of Stamp duty at the Land Administration Office 1 day 2% of the property value for the Stamp duty 9 Execution of the sale contract at the office of Documents Authentication and Registration 1 day Already paid in previous procedure 10 Apply for registration of property and obtain title deed in the buyer s name 30 days Included in previous procedures 27

31 Registering Property Details - Ethiopia Procedure 1 Verify the owner of the property and obtain the Carta and plan at the sub-city office Time to complete: Cost to complete: 2 days 200 ETB Agency: Sub-City Office Comment: Since 2005 the Land Registy has been decentralized into 10 subcities. Due diligence is conducted at the sub-city where the warehouse is located. This search will provide information on the owner of the building, date of construction of the building, the basic area of the property, whether the property is affected by encumbrances. At the same time, the carta and plan of the warehouse will be provided. At the time of due diligence, the lawyer of the buying company will also check that the other company is properly registered. Procedure 2 Evaluation of the sale price by the sub-city Time to complete: Cost to complete: 1 day no cost Agency: Sub-City Office Comment: The parties will bring the sale agreement to the sub-city. The sub-city official will check that the price included in the sale agreement corresponds to the Master list of price. Each sub-city has a fee schedule depending on the location of the building. In the event that the price in the sale agreement is not the same as the one indicated by the sub-city, Stamp duty will be paid based on the amount indicated by the sub-city and not on the amount written in the sale agreement. Procedure 3 The seller must obtain tax clearance from Tax Authorities Time to complete: Cost to complete: 2 days no cost Agency: Tax Authority Comment: The seller must obtain tax clearance on the property (not income tax) from Tax Authorities for transfer tax. This institution has also been decentralized. Procedure 4 Obtain water utility clearance from the local Water Company Time to complete: Cost to complete: 1 day no cost Agency: Local Water Company 28

32 Comment: The seller must obtain water utility clearance from the local Water Company. Procedure 5 Obtain energy utility clearance from the local Energy Company Time to complete: Cost to complete: 1 day no cost Agency: Local Energy Company Comment: The seller must obtain energy utility clearance from the local Energy Company. Procedure 6 Payment of capital gains tax at Inland Revenue Service Time to complete: Cost to complete: 1 day not counted Agency: Inland Revenue Service Comment: The seller pays the capital gain tax at the Customs and Inland Revenue Authority. The tax amount is calculated based on a set scale. Procedure 7 Request the execution of the sale contract at the office of Documents Authentication and Registration Time to complete: Cost to complete: 1 day 10 ETB for the service charge + 55 ETB for the power of attorney Agency: Office of Documents Authentication and Registration Comment: The parties go to the office of Documents Authentication and Registration. The buyer is given a slip on how much to pay and which account this amount should be deposited into. The parties must provide the following documents The seller gives the Title deed of the building A copy of the ID of both managers The power of attorney of each manager to ensure that they do have the power to sell/buy this warehouse at the specific amount. A copy of the Business License for each PLC. Procedure 8 Payment of Stamp duty at the Land Administration Office Time to complete: Cost to complete: 1 day 2% of the property value for the Stamp duty Agency: Land Administration Office Comment: Stamp duty is set by Proclamation 110/1998. Upon payment, the buyer will be given a receipt that he must bring back to the office of Documents Authentication and Registration 29

33 Procedure 9 Execution of the sale contract at the office of Documents Authentication and Registration Time to complete: Cost to complete: 1 day Already paid in previous procedure Agency: Office of Documents Authentication and Registration Comment: Payment is done at the municipal tax office. Procedure 10 Apply for registration of property and obtain title deed in the buyer s name Time to complete: Cost to complete: 30 days Included in previous procedures Agency: Land Administration Office Comment: The buyer company brings the authenticated sale contract to the Land Administration Office for the final transfer. This can take up to 1 month or even more to obtain the new deed. 30

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35 1. Benchmarking Getting Credit Regulations: Ethiopia is ranked 128 overall for Getting Credit. Ranking of Ethiopia in Getting Credit - Compared to good practice and selected economies: 32

36 The following table shows Getting Credit data for Ethiopia compared to good practice and comparator economies: Good Practice Economies Strength of legal rights index (0-10) Depth of credit information index (0-6) Public registry coverage (% of adults) Private bureau coverage (% of adults) New Zealand* Portugal 67.1 Singapore* 10 United Kingdom 6 Selected Economy Ethiopia Comparator Economies Egypt, Arab Rep Eritrea Kenya Rwanda * The following economies are also good practice economies for : Strength of legal rights index (0-10): Hong Kong, China, Kenya, Kyrgyz Republic, Malaysia Private bureau coverage (% of adults): Argentina, Australia, Canada, Iceland, Ireland, Norway, Sweden, United Kingdom, United States 27 countries have the highest credit information index. 33

37 2. Historical data: Getting Credit in Ethiopia Getting Credit data Rank Strength of legal rights index (0-10) Depth of credit information index (0-6) Private bureau coverage (% of adults) Public registry coverage (% of adults) The following graphs illustrate the Getting Credit sub indicators in Ethiopia over the past 4 years: 34

38 Getting Credit in Ethiopia The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in Ethiopia. Getting Credit Indicators (2010) Indicator Private bureau coverage (% of adults) Private credit bureau Public credit registry 2 Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative data distributed? No No 0 Does the registry distribute credit information from retailers, trade creditors or utility companies as well as financial institutions? No No 0 Are more than 2 years of historical credit information distributed? No Yes 1 Is data on all loans below 1% of income per capita distributed? No No 0 Is it guaranteed by law that borrowers can inspect their data in the largest credit registry? No No 0 Coverage Number of individuals 0.. Number of firms

39 Strength of legal rights index (0-10) Can any business use movable assets as collateral while keeping possession of the assets; and any financial institution accept such assets as collateral? 4 Yes Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description of collateral? No Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of collateral? Yes May a security right extend to future or after-acquired assets, and may it extend automatically to the products, proceeds or replacements of the original assets? No Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations and debts can be secured by stating a maximum amount rather than a specific amount between the parties? Yes Is a collateral registry in operation, that is unified geographically and by asset type, as well as indexed by the grantor's name of a security right? No Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? No Do secured creditors have absolute priority to their collateral in bankruptcy procedures? No During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? No Does the law authorize parties to agree on out of court enforcement? Yes 36

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41 1. Benchmarking Protecting Investors Regulations: Ethiopia is ranked 120 overall for Protecting Investors. Ranking of Ethiopia in Protecting Investors - Compared to good practice and selected economies: 38

42 The following table shows Protecting Investors data for Ethiopia compared to good practice and comparator economies: Good Practice Economies Strength of investor protection index (0-10) New Zealand 9.7 Selected Economy Ethiopia 4.3 Comparator Economies Egypt, Arab Rep. 5.3 Eritrea 4.7 Kenya 5.0 Rwanda

43 2. Historical data: Protecting Investors in Ethiopia Protecting Investors data Rank Strength of investor protection index (0-10) The following graph illustrates the Protecting Investors index in Ethiopia compared to best practice and selected Economies: New Zealand Rwanda Egypt, Arab Rep. Kenya Eritrea Ethiopia Note: The higher the score, the greater the investor protection. 40

44 Protecting Investors in Ethiopia The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are calculated in Ethiopia. Protecting Investors Data (2010) Indicator Extent of disclosure index (0-10) 4 What corporate body provides legally sufficient approval for the transaction? Whether immediate disclosure of the transaction to the public and/or shareholders is required? Whether disclosure of the transaction in published periodic filings (annual reports) is required? Whether disclosure of the conflict of interest by Mr. James to the board of directors is required? Whether an external body must review the terms of the transaction before it takes place? Extent of director liability index (0-10) Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller transaction causes to the company? Whether shareholders can hold the approving body (the CEO or board of directors) liable for the damage that the Buyer-Seller transaction causes to the company? Whether a court can void the transaction upon a successful claim by a shareholder plaintiff? Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff?

45 Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff? Whether fines and imprisonment can be applied against Mr. James? Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction causes to the company? Ease of shareholder suits index (0-10) 5 Whether the plaintiff can obtain any documents from the defendant and witnesses during trial? Whether the plaintiff can directly question the defendant and witnesses during trial? Whether the plaintiff can request categories of documents from the defendant without identifying specific ones? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the transaction? Whether the level of proof required for civil suits is lower than that of criminal cases? Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before filing suit? Strength of investor protection index (0-10)

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47 1. Benchmarking Paying Taxes Regulations: Ethiopia is ranked 47 overall for Paying Taxes. Ranking of Ethiopia in Paying Taxes - Compared to good practice and selected economies: 44

48 The following table shows Paying Taxes data for Ethiopia compared to good practice and comparator economies: Good Practice Economies Payments (number per year) Time (hours per year) Total tax rate (% profit) Maldives* 3 0 Timor-Leste 0.2 Selected Economy Ethiopia Comparator Economies Egypt, Arab Rep Eritrea Kenya Rwanda * The following economies are also good practice economies for : Payments (number per year): Qatar 45

49 2. Historical data: Paying Taxes in Ethiopia Paying Taxes data Rank Total tax rate (% profit) Payments (number per year) Time (hours per year) The following graphs illustrate the Paying Taxes sub indicators in Ethiopia over the past 4 years: 46

50 Paying Taxes in Ethiopia The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year in Ethiopia, as well as measures of administrative burden in paying taxes. Tax or mandatory contribution Payments (number) Notes on Payments Time (hours) Statutory tax rate Tax base Totaltax rate (% profit) Notes on TTR Value added tax (VAT) % value added Stamp duty 1 various rates Personal income tax 24 Vehicle tax ETB 0.10 Tax on interest 0 withheld 5.0% interest income 0.30 License renewal fees 1 fixed fee 0.60 Capital gains tax % capital gains 0.80 Excise tax on fuel % CIF (cost, insurance, and freight) 1.00 Property tax 1 2 ETB square meter 2.30 Corporate income tax % taxable profit

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53 1. Benchmarking Trading Across Borders Regulations: Ethiopia is ranked 157 overall for Trading Across Borders. Ranking of Ethiopia in Trading Across Borders - Compared to good practice and selected economies: 50

54 The following table shows Trading Across Borders data for Ethiopia compared to good practice and comparator economies: Good Practice Economies Documents to export (number) Time to export (days) Cost to export (US$ per container) Documents to import (number) Time to import (days) Cost to import (US$ per container) Denmark* 5 France 2 2 Malaysia 450 Singapore Selected Economy Ethiopia Comparator Economies Egypt, Arab Rep Eritrea Kenya Rwanda * The following economies are also good practice economies for : Time to export (days): Estonia 51

55 2. Historical data: Trading Across Borders in Ethiopia Trading Across Borders data Rank Cost to export (US$ per container) Cost to import (US$ per container) Documents to export (number) Documents to import (number) Time to export (days) Time to import (days) The following graphs illustrate the Trading Across Borders sub indicators in Ethiopia over the past 4 years: 52

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57 Trading Across Borders in Ethiopia These tables list the procedures necessary to import and export a standardized cargo of goods in Ethiopia. The documents required to export and import the goods are also shown. Nature of Export Procedures (2010) Duration (days) US$ Cost Documents preparation Customs clearance and technical control Ports and terminal handling Inland transportation and handling Totals Nature of Import Procedures (2010) Duration (days) US$ Cost Documents preparation Customs clearance and technical control Ports and terminal handling Inland transportation and handling Totals

58 Documents for Export and Import Export Customs export declaration Export license Health certificate Insurance certificate Packing list Shipment booking Tax certificate Truck manifest Import Bill of lading Certificate of origin Commercial invoice Foreign exchange authorization Import license Insurance documentation Packing list Technical standard/health certificate 55

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60 1. Benchmarking Enforcing Contracts Regulations: Ethiopia is ranked 57 overall for Enforcing Contracts. Ranking of Ethiopia in Enforcing Contracts - Compared to good practice and selected economies: 57

61 The following table shows Enforcing Contracts data for Ethiopia compared to good practice and comparator economies: Good Practice Economies Procedures (number) Time (days) Cost (% of claim) Bhutan 0.1 Ireland 20 Singapore 150 Selected Economy Ethiopia Comparator Economies Egypt, Arab Rep Eritrea Kenya Rwanda

62 2. Historical data: Enforcing Contracts in Ethiopia Enforcing Contracts data Rank Procedures (number) Time (days) Cost (% of claim) The following graphs illustrate the Enforcing Contracts sub indicators in Ethiopia over the past 4 years: 59

63 Enforcing Contracts in Ethiopia This topic looks at the efficiency of contract enforcement in Ethiopia. Nature of Procedure (2010) Indicator Procedures (number) 37 Time (days) 620 Filing and service 60.0 Trial and judgment Enforcement of judgment Cost (% of claim)* Attorney cost (% of claim) 10.0 Court cost (% of claim) 4.8 Enforcement Cost (% of claim)

64 Court information: Addis Ababa Federal First Instance Court ("Yefederal Yemjemeria Dereja Fird Bet") * Claim assumed to be equivalent to 200% of income per capita. 61

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66 1. Benchmarking Closing Business Regulations: Ethiopia is ranked 82 overall for Closing a Business. Ranking of Ethiopia in Closing Business - Compared to good practice and selected economies: 63

67 The following table shows Closing Business data for Ethiopia compared to good practice and comparator economies: Good Practice Economies Recovery rate (cents on the dollar) Time (years) Cost (% of estate) Ireland 0.4 Japan 92.7 Singapore* 1 Selected Economy Ethiopia Comparator Economies Egypt, Arab Rep Eritrea 0.0 no practice no practice Kenya Rwanda 0.0 no practice no practice * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 64

68 2. Historical data: Closing Business in Ethiopia Closing a Business data Rank Time (years) Cost (% of estate) Recovery rate (cents on the dollar) The following graphs illustrate the Closing Business sub indicators in Ethiopia over the past 4 years: 65

69 Since 2004 has been tracking reforms aimed at simplifying business regulations, strengthening property rights, opening access to credit and enforcing contracts by measuring their impact on 10 indicator sets. * Nearly 1,000 reforms have had an impact on these indicators. 2011, covering June 2009 to June 2010, reports that 117 economies implemented 216 reforms to make it easier to start a business. 64% of economies measured by Doing Business have reformed this year, focusing on easing business start-up, lightening the tax burden, simplifying import and export regulations and improving credit information systems. The top 10 most-improved in 2011 Economy Positive Change Negative Change Starting a Business Dealing with Construction Permits Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Closing a Business Kazakhstan Rwanda Peru Vietnam Cape Verde Tajikistan Zambia Hungary Grenada Brunei Darussalam * For 2011 the Employing Workers indicator is not included in the aggregate ease of doing business ranking. 66

70 Summary of changes to business regulation in top 10 most improved economies in Doing Business 2011 and selected comparator economies. Brunei Darussalam Cape Verde Egypt, Arab Rep. Ethiopia Brunei Darussalam made starting a business easier by improving efficiency at the company registrar and implementing an electronic system for name searches. Brunei Darussalam reduced the corporate income tax rate from 23.5% to 22% while also introducing a lower tax rate for small businesses, ranging from 5.5% to 11%. The introduction of an electronic customs system in Brunei Darussalam made trading easier. Cape Verde made start-up easier by eliminating the need for a municipal inspection before a business begins operations and computerizing the system for delivering the municipal license. Cape Verde eased property registration by switching from fees based on a percentage of the property value to lower fixed rates. Cape Verde abolished the stamp duties on sales and checks. Egypt reduced the cost to start a business. Egypt made trading easier by introducing an electronic system for submitting export and import documents. Ethiopia made trading easier by addressing internal bureaucratic inefficiencies. Grenada Hungary Grenada eased business start-up by transferring responsibility for the commercial registry from the courts to the civil administration. The appointment of a registrar focusing only on property cut the time needed to transfer property in Grenada by almost half. Grenada s customs administration made trading faster by simplifying procedures, reducing inspections, improving staff training and enhancing communication with users. Hungary implemented a time limit for the issuance of building permits. Hungary reduced the property registration fee by 6% of the property value. Hungary simplified taxes and tax bases. Amendments to Hungary s bankruptcy law encourage insolvent companies to consider reaching agreements with creditors out of court so as to avoid bankruptcy. Kazakhstan Kazakhstan eased business start-up by reducing the minimum capital requirement to 100 tenge ($0.70) and eliminating the need to have the memorandum of association and company charter notarized. Kazakhstan made dealing with construction permits easier by implementing a one-stop shop related to technical conditions for utilities. Kazakhstan strengthened investor protections by requiring greater corporate disclosure in company annual reports. Kazakhstan speeded up trade through efforts to modernize customs, including implementation of a risk management system and improvements in customs automation. Kenya Peru Rwanda Tajikistan Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, merging the tax and value added tax registration procedures and digitizing records at the registrar. Kenya increased the administrative burden of paying taxes by requiring quarterly filing of payroll taxes. Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue Authority s electronic data interchange system for customs clearance. Peru eased business start-up by simplifying the requirements for operating licenses and creating an online one-stop shop for business registration. Peru streamlined construction permitting by implementing administrative reforms. Peru introduced fast-track procedures at the land registry, cutting by half the time needed to register property. Peru made trading easier by implementing a new web-based electronic data interchange system, risk-based inspections and payment deferrals. Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and implementing new time limits for the issuance of various permits. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that loans of all sizes be reported to the central bank s public credit registry. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with Uganda and other neighbors, leading to an improvement in the trade logistics environment. Tajikistan made starting a business easier by creating a one-stop shop that consolidates registration with the state and the tax authority. Tajikistan strengthened investor protections by requiring greater corporate disclosure in the annual report and greater access to corporate information for minority investors. Tajikistan lowered its corporate income tax rate. 67

71 Vietnam Zambia Vietnam eased company start-up by creating a one-stop shop that combines the processes for obtaining a business license and tax license and by eliminating the need for a seal for company licensing. Vietnam made dealing with construction permits easier by reducing the cost to register newly completed buildings by 50% and transferring the authority to register buildings from local authorities to the Department of National Resources and Environment. Vietnam improved its credit information system by allowing borrowers to examine their own credit report and correct errors. Zambia eased business start-up by eliminating the minimum capital requirement. Zambia eased trade by implementing a one-stop border post with Zimbabwe, launching web-based submission of customs declarations and introducing scanning machines at border posts. Zambia improved contract enforcement by introducing an electronic case management system in the courts that provides electronic referencing of cases, a database of laws, real-time court reporting and public access to court records. 68

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