Regional Profile 2017 East African Community (EAC) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 2 © 2017 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 19 18 17 16 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 29 Getting electricity ....................................................................................................................... 46 Registering property .................................................................................................................. 61 Getting credit .............................................................................................................................. 79 Protecting minority investors ................................................................................................... 93 Paying taxes .............................................................................................................................. 108 Trading across borders ............................................................................................................ 126 Enforcing contracts .................................................................................................................. 148 Resolving insolvency ................................................................................................................ 163 Distance to frontier and ease of doing business ranking .................................................... 176 Resources on the Doing Business website ............................................................................ 179 Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is also provides data for other selected economies for a local entrepreneur to open and run a small to (comparator economies) for each indicator. The data in medium-size business when complying with relevant this report are current as of June 1, 2016 (except for the regulations. It measures and tracks changes in paying taxes indicators, which cover the period January– regulations affecting 11 areas in the life cycle of a December 2015). business: starting a business, dealing with construction The Doing Business methodology has limitations. Other permits, getting electricity, registering property, getting areas important to business—such as an economy’s credit, protecting minority investors, paying taxes, proximity to large markets, the quality of its trading across borders, enforcing contracts, resolving infrastructure services (other than those related to insolvency and labor market regulation. Doing Business trading across borders and getting electricity), the 2017 presents the data for the labor market regulation security of property from theft and looting, the indicators in an annex. The report does not present transparency of government procurement, rankings of economies on labor market regulation macroeconomic conditions or the underlying strength of indicators or include the topic in the aggregate distance institutions—are not directly studied by Doing Business. to frontier score or ranking on the ease of doing The indicators refer to a specific type of business, business. generally a local limited liability company operating in In a series of annual reports Doing Business presents the largest business city. Because standard assumptions quantitative indicators on business regulations and the are used in the data collection, comparisons and protection of property rights that can be compared benchmarks are valid across economies. The data not across 190 economies, from Afghanistan to Zimbabwe, only highlight the extent of obstacles to doing business; over time. The data set covers 48 economies in Sub- they also help identify the source of those obstacles, Saharan Africa, 32 in Latin America and the Caribbean, 25 supporting policy makers in designing regulatory reform. in East Asia and the Pacific, 25 in Eastern Europe and More information is available in the full report. Doing Central Asia, 20 in the Middle East and North Africa and Business 2017 presents the indicators, analyzes their 8 in South Asia, as well as 32 OECD high-income relationship with economic outcomes and presents economies. The indicators are used to analyze economic business regulatory reforms. The data, along with outcomes and identify what reforms have worked, where information on ordering Doing Business 2017, are and why. available on the Doing Business website at This economy profile presents the Doing Business http://www.doingbusiness.org. indicators for Afghanistan. To allow useful comparison, it Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 5 THE BUSINESS ENVIRONMENT CHANGES IN DOING BUSINESS 2017 As part of a three-year update in methodology, Doing Business 2017 expands further by adding postfiling processes to the paying taxes indicator, including a gender component in three of the indicators and developing a new pilot indicator on selling to the government. Also, for the first time this year Doing Business collects data on Somalia, bringing the total number of economies covered to 190. The paying taxes indicator is expanded this year to include postfiling processes – those processes that occur after a firm complies with its regular tax obligations. These include tax refunds, tax audits and tax appeals. In particular, Doing Business measures the time it takes to get a value added tax (VAT) refund, deal with a simple mistake on a corporate tax return that can potentially trigger an audit and good practices with administrative appeals process. This year’s Doing Business report presents a gender dimension in four of the indicator sets: starting a business, registering property, enforcing contracts and labor market regulation. Three of these areas are included in the distance to frontier score and in the ease of doing business ranking, while the fourth—labor market regulation—is not. Doing Business has traditionally assumed that the entrepreneurs or workers discussed in the case studies were men. This was incomplete by not reflecting correctly the Doing Business processes as applied to women—which in some economies may be different from the processes applied to men. Starting this year, Doing Business measures the starting a business process for two case scenarios: one where all entrepreneurs are men and one where all entrepreneurs are women. In economies where the processes are more onerous if the entrepreneur is a woman, Doing Business now counts the extra procedures applied to roughly half of the population that is female (for example, obtaining a husband’s consent or gender-specific requirements for opening a personal bank account when starting a business). Within the registering property indicators, a gender component has been added to the quality of land administration index. This component measures women’s ability to use, own, and transfer property according to the law. Finally, within the enforcing contracts indicator set, economies will be scored on having equal evidentiary weight of women’s testimony in court. Also for the first time this year Doing Business collects data on Somalia, bringing the total number of economies covered to 190. For more details on the changes, see the “”Old and new factors covered in Doing Business” section in the Overview chapter starting on page 1 of the Doing Business 2017 report. For more details on the data and methodology, please see the “Data Notes” chapter starting on page 114 of the Doing Business 2017 report. For more details on the distance to frontier metric, please see the “Distance to frontier and ease of doing business ranking” chapter in this profile. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s permits, getting electricity, registering property, regulatory environment for business, a good place to getting credit, protecting minority investors, paying start is to find out how it compares with the regulatory taxes, trading across borders, enforcing contracts environment in other economies. Doing Business and resolving insolvency. The labor market provides an aggregate ranking on the ease of doing regulation indicators are not included in this year’s business based on indicator sets that measure and aggregate ease of doing business ranking, but the benchmark regulations applying to domestic small to data are presented in the economy profile. medium-size businesses through their life cycle. The ease of doing business ranking compares Economies are ranked from 1 to 190 by the ease of economies with one another; the distance to frontier doing business ranking. Doing Business presents results score benchmarks economies with respect to for 2 aggregate measures: the distance to frontier score regulatory best practice, showing the absolute and the ease of doing business ranking. The ranking of distance to the best performance on each Doing economies is determined by sorting the aggregate Business indicator. When compared across years, the distance to frontier scores, rounded to two decimals. An distance to frontier score shows how much the economy’s distance to frontier score is indicated on a regulatory environment for local entrepreneurs in an scale from 0 to 100, where 0 represents the worst economy has changed over time in absolute terms, performance and 100 the frontier. (See the chapter on while the ease of doing business ranking can show the distance to frontier and ease of doing business). only how much the regulatory environment has The 10 topics included in the ranking in Doing Business changed relative to that in other economies. 2017: starting a business, dealing with construction Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy stands in regional average (figure 1.2). Another perspective is the aggregate ranking on the ease of doing business is provided by the regional average rankings on the topics useful. Also useful is to know how it ranks compared with included in the ease of doing business ranking (figure 1.3) other economies in the region and compared with the and the distance to frontier scores (figures 1.4 and 1.5). Figure 1.2 How economies in East African Community (EAC) rank on the ease of doing business Note: The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population- weighted average for the 2 cities. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 8 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - East African Community (EAC) (Scale: Rank 190 center, Rank 1 outer edge) Regional average ranking Source: Doing Business database. Figure 1.4 Distance to frontier scores on Doing Business topics - East African Community (EAC) (Scale: Score 0 center, Score 100 outer edge) Note: The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 9 Figure 1.5 How far has East African Community (EAC) come in the areas measured by Doing Business? Source: Doing Business database. Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits, registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are only comparable to 2014. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 114 of the Doing Business 2017 report for more details on the distance to frontier score. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business The absolute values of the indicators tell another part of tells only part of the story, so do changes in that ranking. the story (table 1.1). Policy makers can learn much by Yearly movements in rankings can provide some comparing the indicators for their economy with those indication of changes in an economy’s regulatory for the lowest- and highest-scoring economies in the environment for firms, but they are always relative. An region as well as those for the best performers globally. economy’s ranking might change because of These comparisons may reveal unexpected strengths in developments in other economies. An economy that an area of business regulation—such as a regulatory implemented business regulation reforms may fail to rise process that can be completed with a small number of in the rankings (or may even drop) if it is passed by procedures in a few days and at a low cost. others whose business regulation reforms had a more significant impact as measured by Doing Business. Table 1.1 Summary of Doing Business indicators for East African Community (EAC) Lowest regional Best regional Best global Indicator Regional average performance performance performance Starting a Business 165 (Uganda) 18 (Burundi) 102.00 1 (New Zealand) (rank) Starting a Business 71.30 (Uganda) 94.45 (Burundi) 83.04 99.96 (New Zealand) (DTF Score) Procedure – Men 13.0 (Uganda) 3.0 (Burundi) 7.4 1.0 (New Zealand) (number) Time – Men (days) 26.0 (Uganda) 4.0 (Burundi) 16.4 0.5 (New Zealand) Cost – Men (% of 48.5 (Rwanda) 13.9 (Burundi) 28.4 0.0 (Slovenia) income per capita) Procedure – Women 13.0 (Uganda) 3.0 (Burundi) 7.4 1.0 (New Zealand) (number) Time – Women (days) 26.0 (Tanzania) 4.0 (Rwanda) 16.4 0.5 (New Zealand) Cost – Women (% of 48.5 (Rwanda) 13.9 (Burundi) 28.4 0.0 (Slovenia) income per capita) Paid-in min. capital (% 0.0 (Burundi) 0.0 (Rwanda) 0.0 0.0 (127 Economies*) of income per capita) Dealing with Construction Permits 169 (Burundi) 136 (Tanzania) 153.20 1 (New Zealand) (rank) Dealing with Construction Permits 52.72 (Burundi) 61.69 (Tanzania) 56.84 87.40 (New Zealand) (DTF Score) Procedures (number) 18.0 (Tanzania) 14.0 (Burundi) 16.4 7.0 (4 Economies*) Time (days) 205.0 (Tanzania) 99.0 (Burundi) 139.8 28.0 (Korea, Rep.) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 11 Lowest regional Best regional Best global Indicator Regional average performance performance performance Cost (% of warehouse 0.1 (Trinidad and 42.4 (Rwanda) 5.3 (Tanzania) 14.7 value) Tobago) Building quality control 3.0 (Burundi) 13.0 (Rwanda) 8.5 15.0 (Luxembourg*) index (0-15) Getting Electricity 183 (Burundi) 87 (Tanzania) 130.80 1 (Korea, Rep.) (rank) Getting Electricity 26.45 (Burundi) 70.52 (Tanzania) 53.37 99.88 (Korea, Rep.) (DTF Score) Procedures (number) 6.0 (Uganda) 3.0 (Kenya) 4.4 3.0 (15 Economies*) Time (days) 158.0 (Burundi) 34.0 (Rwanda) 92.8 18.0 (Korea, Rep.*) Cost (% of income per 8,449.0 (Uganda) 642.0 (Kenya) 5,935.8 0.0 (Japan) capita) Reliability of supply and transparency of 0.0 (Kenya) 4.0 (Uganda) 1.6 8.0 (26 Economies*) tariff index (0-8) Registering Property 132 (Tanzania) 4 (Rwanda) 93.40 1 (New Zealand) (rank) Registering Property 51.37 (Tanzania) 92.67 (Rwanda) 63.35 94.46 (New Zealand) (DTF Score) Procedures (number) 10.0 (Uganda) 3.0 (Rwanda) 7.0 1.0 (4 Economies*) Time (days) 67.0 (Tanzania) 12.0 (Rwanda) 41.0 1.0 (3 Economies*) Cost (% of property 6.0 (Kenya) 0.1 (Rwanda) 3.3 0.0 (Saudi Arabia) value) Quality of the land administration index 4.5 (Burundi) 28.0 (Rwanda) 13.3 29.0 (Singapore) (0-30) Getting Credit (rank) 175 (Burundi) 2 (Rwanda) 59.40 1 (New Zealand) Getting Credit (DTF 10.00 (Burundi) 95.00 (Rwanda) 61.00 100.00 (New Zealand) Score) Strength of legal rights 2.0 (Burundi) 11.0 (Rwanda) 6.2 12.0 (3 Economies*) index (0-12) Depth of credit 0.0 (Burundi) 8.0 (Rwanda) 6.0 8.0 (30 Economies*) information index (0-8) Credit registry 0.0 (Kenya) 7.4 (Rwanda) 2.3 100.0 (3 Economies*) coverage (% of adults) Credit bureau coverage 0.0 (Burundi) 25.8 (Kenya) 11.1 100.0 (23 Economies*) (% of adults) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 12 Lowest regional Best regional Best global Indicator Regional average performance performance performance Protecting Minority 145 (Tanzania) 87 (Kenya) 115.40 1 (New Zealand*) Investors (rank) Protecting Minority 40.00 (Tanzania) 53.33 (Kenya) 47.33 83.33 (New Zealand*) Investors (DTF Score) Strength of minority investor protection 4.0 (Tanzania) 5.3 (Kenya) 4.7 8.3 (New Zealand*) index (0-10) Extent of conflict of interest regulation 5.0 (Uganda) 6.7 (Kenya) 5.8 9.3 (New Zealand*) index (0-10) Extent of shareholder governance index (0- 2.7 (Burundi) 5.0 (Uganda) 3.7 8.3 (Norway) 10) Paying Taxes (rank) 160 (Tanzania) 66 (Rwanda) 107.20 1 (United Arab Emirates) Paying Taxes (DTF 99.44 (United Arab 56.20 (Tanzania) 78.48 (Rwanda) 66.49 Score) Emirates) Payments (number per 3.0 (Hong Kong SAR, 53.0 (Tanzania) 25.0 (Burundi) 33.8 year) China*) Time (hours per year) 232.0 (Burundi) 124.0 (Rwanda) 188.3 55.0 (Luxembourg) Total tax rate (% of 43.9 (Tanzania) 33.0 (Rwanda) 37.6 26.1 (32 Economies*) profit) Postfiling index (0-100) 55.1 98.5 (Estonia) Trading across 180 (Tanzania) 87 (Rwanda) 133.60 1 (10 Economies*) Borders (rank) Trading across 20.21 (Tanzania) 71.19 (Rwanda) 52.81 100.00 (10 Economies*) Borders (DTF Score) Time to export: Border 97 (Rwanda) 21 (Kenya) 69 0 (18 Economies*) compliance (hours) Cost to export: Border 1,160 (Tanzania) 106 (Burundi) 376 0 (18 Economies*) compliance (USD) Time to export: Documentary 120 (Burundi) 19 (Kenya) 68 1 (25 Economies*) compliance (hours) Cost to export: Documentary 275 (Tanzania) 102 (Uganda) 166 0 (19 Economies*) compliance (USD) Time to import: Border 402 (Tanzania) 86 (Rwanda) 195 0 (25 Economies*) compliance (hours) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 13 Lowest regional Best regional Best global Indicator Regional average performance performance performance Cost to import: Border 1,350 (Tanzania) 282 (Rwanda) 680 0 (28 Economies*) compliance (USD) Time to import: Documentary 240 (Tanzania) 72 (Rwanda) 143 1 (29 Economies*) compliance (hours) Cost to import: Documentary 1,025 (Burundi) 115 (Kenya) 386 0 (30 Economies*) compliance (USD) Enforcing Contracts 149 (Burundi) 59 (Tanzania) 90.80 1 (Korea, Rep.) (rank) Enforcing Contracts 45.74 (Burundi) 61.66 (Tanzania) 56.61 84.15 (Korea, Rep.) (DTF Score) Time (days) 832.0 (Burundi) 230.0 (Rwanda) 506.4 164.0 (Singapore) Cost (% of claim) 82.7 (Rwanda) 14.3 (Tanzania) 41.7 9.0 (Iceland) Quality of judicial 6.0 (Tanzania) 13.0 (Rwanda) 8.7 15.5 (Australia) processes index (0-18) Resolving Insolvency 141 (Burundi) 73 (Rwanda) 103.40 1 (Finland) (rank) Resolving Insolvency 30.52 (Burundi) 47.85 (Rwanda) 40.44 93.89 (Finland) (DTF Score) Recovery rate (cents on 7.3 (Burundi) 38.4 (Uganda) 22.9 92.9 (Norway) the dollar) Time (years) 5.0 (Burundi) 2.2 (Uganda) 3.4 0.4 (22 Economies*) Cost (% of estate) 30.0 (Burundi) 22.0 (Tanzania) 26.5 1.0 (22 Economies*) Strength of insolvency 6.0 (Uganda) 12.0 (Rwanda) 9.0 15.0 (6 Economies*) framework index (0-16) * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Note: The global best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2017 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 14 STARTING A BUSINESS WHAT THE STARTING A BUSINESS Formal registration of companies has many INDICATORS MEASURE immediate benefits for the companies and for business owners and employees. Legal entities can Procedures to legally start and operate a outlive their founders. Resources are pooled as company (number) several shareholders join forces to start a company. Formally registered companies have access to Preregistration (for example, name services and institutions from courts to banks as well verification or reservation, notarization) as to new markets. And their employees can benefit Registration in the economy’s largest from protections provided by the law. An additional business city1 benefit comes with limited liability companies. These Postregistration (for example, social security limit the financial liability of company owners to their registration, company seal) investments, so personal assets of the owners are not put at risk. Where governments make registration Obtaining approval from spouse to start a easy, more entrepreneurs start businesses in the business, to leave the home to register the formal sector, creating more good jobs and company or open a bank account. generating more revenue for the government. Obtaining any gender specific document for company registration and operation, national What do the indicators cover? identification card or opening a bank Doing Business measures the ease of starting a account. business in an economy by recording all procedures Time required to complete each procedure officially required or commonly done in practice by (calendar days) an entrepreneur to start up and formally operate an industrial or commercial business—as well as the Does not include time spent gathering time and cost required to complete these procedures. information It also records the paid-in minimum capital that Each procedure starts on a separate day (2 companies must deposit before registration (or procedures cannot start on the same day). within 3 months). The ranking of economies on the Procedures that can be fully completed ease of starting a business is determined by sorting online are recorded as ½ day. their distance to frontier scores for starting a Procedure completed once final document is business. These scores are the simple average of the received distance to frontier scores for each of the component indicators. No prior contact with officials To make the data comparable across economies, Cost required to complete each procedure Doing Business uses several assumptions about the (% of income per capita) business and the procedures. It assumes that all Official costs only, no bribes information is readily available to the entrepreneur and that there has been no prior contact with No professional fees unless services required officials. It also assumes that the entrepreneur will by law pay no bribes. And it assumes that the business: Paid-in minimum capital (% of income  Is a limited liability company (or its legal per capita) equivalent). If there is more than one type Deposited in a bank or with a notary before of limited liability company in the registration (or within 3 months) economy, the limited liability form most common among domestic firms is chosen. Has at least 10 and up to 50 employees one Information on the most common form is month after the commencement of operations, all obtained from incorporation lawyers or the of them domestic nationals.. statistical office.  Has a turnover of at least 100 times income per Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 15  Operates in the economy’s largest business capita.Has a company deed 10 pages long. city. For 11 economies the data are also collected for the second largest business The owners: city.  Have reached the legal age of majority and are  The size of the entire office space is capable of making decisions as an adult. If there approximately 929 square meters (10,000 is no legal age of majority, they are assumed to square feet). be 30 years old.  Does not qualify for investment incentives  Are sane, competent, in good health and have no or any special benefits. criminal record. .  Are married, the marriage is monogamous and registered with the authorities.  Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 16 STARTING A BUSINESS Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in East business suggest an answer (figure 2.1). The average African Community (EAC) to start a business? The global ranking of the region and comparator regions provide a rankings of these economies on the ease of starting a useful benchmark. Figure 2.1 How economies in East African Community (EAC) rank on the ease of starting a business Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 17 STARTING A BUSINESS The indicators underlying the rankings may be more and the paid-in minimum capital requirement (figure revealing. Data collected by Doing Business show what 2.2). Comparing these indicators across the region and it takes to start a business in each economy in the with averages both for the region and for comparator region: the number of procedures, the time, the cost regions can provide useful insights. Figure 2.2 What it takes to start a business in economies in East African Community (EAC) Procedures (number) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 18 STARTING A BUSINESS Time (days) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 19 STARTING A BUSINESS Cost (% of income per capita) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 20 STARTING A BUSINESS Paid-in minimum capital (% of income per capita) Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 21 STARTING A BUSINESS What are the changes over time? Economies around the world have taken steps making it often as part of a larger regulatory reform program. easier to start a business—streamlining procedures by Among the benefits have been greater firm satisfaction setting up a one-stop shop, making procedures simpler and savings and more registered businesses, financial or faster by introducing technology, and reducing or resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in East African Community (EAC) (table 2.1)? Table 2.1 How have economies in East African Community (EAC) made starting a business easier—or not? By Doing Business report year DB2011 to DB2017 DB year Economy Reform Kenya streamlined the process of getting electricity by introducing the use of a geographic information system DB2017 Kenya which eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain an electricity connection. Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party DB2017 Kenya transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company. Kenya made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the DB2017 Kenya debtor’s business during insolvency proceedings and by introducing regulations for insolvency practitioners. Kenya made Registering property easier by increasing the DB2017 Kenya transparency at its land registry and cadastre. Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, memorandum and articles of association . Kenya also eliminated requirements to DB2017 Kenya sign compliance declarations before a commissioner of oaths. However, Kenya also made starting a business more expensive by introducing a flat fee for company incorporation. Rwanda made dealing with construction permits more cumbersome and expensive by introducing new requirements DB2017 Rwanda to obtain a building permit. It also strengthen the quality control index by implementing the qualifications required for architects and engineers. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 22 DB year Economy Reform Rwanda made enforcing contracts easier by introducing an DB2017 Rwanda electronic case management system for judges and lawyers. The credit bureau in Tanzania expanded credit bureau DB2017 Tanzania borrower coverage and began to distribute credit data from retailers. Rwanda made it easier to register property by introducing DB2017 Rwanda effective time limits and increasing the transparency of the land administration system. Uganda made starting a business easier by eliminating the DB2017 Uganda requirement that a commissioner of oaths must sign compliance declarations. Rwanda made starting a business easier by improving the DB2017 Rwanda online registration one-stop shop and streamlining post- registration procedures. Rwanda made trading across borders easier by removing the DB2017 Rwanda mandatory pre-shipment inspection for imported products. Uganda made trading across borders easier by constructing DB2017 Uganda the Malaba One-Stop Border Post which reduced border compliance time for exports. Uganda made paying taxes easier by eliminating a requirement for tax returns to be submitted in paper copy DB2017 Uganda following online submission. At the same time, Uganda increased the stamp duty for insurance contracts. Tanzania made paying taxes more complicated by increasing the frequency of filing of the skills Development Levy and DB2017 Tanzania more costly by introducing a workers’ compensation tariff paid by employers. Rwanda made paying taxes more complicated by introducing DB2017 Rwanda a requirement that companies file and pay social security contributions monthly instead of quarterly. Burundi made paying taxes easier by introducing a new tax DB2017 Burundi return and eliminating the personalized VAT declaration form. In Uganda the credit bureau expanded borrower coverage, DB2016 Uganda improving access to credit information. In Rwanda the credit bureau started to provide credit scores to banks and other financial institutions while the credit DB2016 Rwanda registry expanded borrower coverage, strengthening the credit reporting system. The utility in Kenya reduced delays for new connections by DB2016 Kenya enforcing service delivery timelines and hiring contractors for meter installation. Kenya made dealing with construction permits more difficult DB2016 Kenya by requiring an additional approval before issuance of the building permit and by increasing the costs for both water Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 23 DB year Economy Reform and sewerage connections Kenya made property transfers faster by improving electronic DB2016 Kenya document management at the land registry and introducing a unified form for registration. Kenya made starting a business easier by reducing the time it DB2016 Kenya takes to assess and pay stamp duty. Kenya improved access to credit information by passing DB2016 Kenya legislation that allows the sharing of positive information and by expanding borrower coverage. The utility in Uganda reduced delays for new electricity connections by deploying more customer service engineers DB2016 Uganda and reducing the time needed for the inspection and meter installation. Rwanda made dealing with construction permits easier by DB2016 Rwanda adopting a new building code and new urban planning regulations. Rwanda improved its insolvency system by introducing provisions on voidable transactions and the approval of DB2016 Rwanda reorganization plans and by establishing additional safeguards for creditors in reorganization proceedings. Rwanda made paying taxes easier for companies by DB2016 Rwanda introducing electronic filing and making its use compulsory. Rwanda strengthened minority investor protections by introducing provisions allowing holders of 10% of a company’s shares to call for an extraordinary meeting of shareholders, requiring holders of special classes of shares to DB2016 Rwanda vote on decisions affecting their shares, requiring board members to disclose information about their directorships and primary employment and requiring that audit reports for listed companies be published in a newspaper. Rwanda made starting a business easier by eliminating the DB2016 Rwanda need for new companies to open a bank account in order to register for VAT. Uganda made starting a business easier by introducing an DB2016 Uganda online system for obtaining a trading license and by reducing business incorporation fees. Rwanda increased the time and cost for documentary and DB2016 Rwanda border compliance for importing by making preshipment inspection mandatory for all imported products. Tanzania reduced the time for both exporting and importing by implementing the Tanzania Customs Integrated System DB2016 Tanzania (TANCIS), an online system for downloading and processing customs documents. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 24 DB year Economy Reform In Rwanda the electricity company made getting electricity DB2015 Rwanda less costly by eliminating several fees. Rwanda made dealing with construction permits easier by DB2015 Rwanda eliminating the fee for obtaining a freehold title and by streamlining the process for obtaining an occupancy permit. Uganda made resolving insolvency easier by consolidating all provisions related to corporate insolvency in one law, establishing provisions on the administration of companies DB2015 Uganda (reorganization), clarifying standards on the professional qualifications of insolvency practitioners and introducing provisions allowing the avoidance of undervalued transactions. Tanzania made paying taxes more complicated for companies by introducing an excise tax on money transfers. On the other DB2015 Tanzania hand, it made paying taxes less costly by reducing the rate of the skill and development levy. Tanzania made starting a business more difficult by DB2015 Tanzania increasing registration fees. Rwanda made starting a business more difficult by requiring DB2015 Rwanda companies to buy an electronic billing machine from a certified supplier. Tanzania made trading across borders easier by upgrading DB2015 Tanzania infrastructure at the port of Dar es Salaam. Uganda made trading across borders easier by implementing DB2015 Uganda the ASYCUDA World electronic system for the submission of export and import documents. Kenya made dealing with construction permits more costly by DB2015 Kenya increasing the building permit fees. Kenya made paying taxes more costly for companies by DB2015 Kenya increasing employers’ social security contribution rate. Kenya improved its credit information system by passing legislation that allows the sharing of both positive and DB2015 Kenya negative credit information and establishes guidelines for the treatment of historical data. Rwanda improved access to credit by establishing clear priority rules outside bankruptcy for secured creditors and DB2015 Rwanda establishing clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures. Tanzania improved access to credit information by creating DB2015 Tanzania credit bureaus. Burundi made getting electricity easier by eliminating the electricity utility’s monopoly on the sale of materials needed DB2014 Burundi for new connections and by dropping the processing fee for new connections. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 25 DB year Economy Reform Burundi made dealing with construction permits easier by DB2014 Burundi establishing a one-stop shop for obtaining building permits and utility connections. Burundi made paying taxes less costly for companies by DB2014 Burundi reducing corporate income tax rate. Burundi made transferring property easier by creating a one- DB2014 Burundi stop shop for property registration. Burundi made starting a business easier by allowing registration with the Ministry of Labor at the one-stop shop DB2014 Burundi and by speeding up the process of obtaining the registration certificate. Burundi made trading across borders easier by eliminating DB2014 Burundi the requirement for a preshipment inspection clean report of findings. Rwanda made dealing with construction permits easier and less costly by reducing the building permit fees, DB2014 Rwanda implementing an electronic platform for building permit applications and streamlining procedures. Tanzania made resolving insolvency easier through new rules clearly specifying the professional requirements and DB2014 Tanzania remuneration for insolvency practitioners, promoting reorganization proceedings and streamlining insolvency proceedings. Rwanda made resolving insolvency easier through a new law clarifying the standards for beginning insolvency proceedings; preventing the separation of the debtor’s assets during DB2014 Rwanda reorganization proceedings; setting clear time limits for the submission of a reorganization plan; and implementing an automatic stay of creditors’ enforcement actions. Rwanda made paying taxes easier and less costly for companies by rolling out its electronic filing system to the DB2014 Rwanda majority of businesses and by reducing the property tax rate and business trading license fee. Rwanda strengthened investor protections through a new law DB2014 Rwanda allowing plaintiffs to cross-examine defendants and witnesses with prior approval of the questions by the court. Rwanda made transferring property easier by eliminating the requirement to obtain a tax clearance certificate and by DB2014 Rwanda implementing the web-based Land Administration Information System for processing land transactions. Uganda made transferring property easier by eliminating the DB2014 Uganda need to have instruments of land transfer physically embossed to certify payment of the stamp duty. Rwanda made starting a business easier by reducing the time DB2014 Rwanda required to obtain a registration certificate. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 26 DB year Economy Reform Rwanda made trading across borders easier by introducing an DB2014 Rwanda electronic single-window system at the border. Tanzania improved its credit information system through new regulations that provide for the licensing of credit reference DB2014 Tanzania bureaus and outline the functions of the credit reference data bank. Rwanda strengthened its secured transactions system by providing more flexibility on the types of debts and DB2014 Rwanda obligations that can be secured through a collateral agreement. Burundi made starting a business easier by eliminating the requirements to have company documents notarized, to DB2013 Burundi publish information on new companies in a journal and to register new companies with the Ministry of Trade and Industry. Kenya made paying taxes faster for companies by enhancing DB2013 Kenya electronic filing systems. Tanzania made starting a business easier by eliminating the DB2013 Tanzania requirement for inspections by health, town and land officers as a prerequisite for a business license. Tanzania made dealing with construction permits more DB2013 Tanzania expensive by increasing the cost to obtain a building permit. Uganda made transferring property more difficult by introducing a requirement for property purchasers to obtain an income tax certificate before registration, resulting in delays at the Uganda Revenue Authority and the Ministry of DB2013 Uganda Finance. At the same time, Uganda made it easier by digitizing records at the title registry, increasing efficiency at the assessor’s office and making it possible for more banks to accept the stamp duty payment. Rwanda made enforcing contracts easier by implementing an DB2013 Rwanda electronic filing system for initial complaints. Uganda strengthened its insolvency process by clarifying rules on the creation of mortgages, establishing the duties of DB2013 Uganda mortgagors and mortgagees, defining priority rules, providing remedies for mortgagors and mortgagees and establishing the powers of receivers. Rwanda made getting electricity easier by reducing the cost DB2013 Rwanda of obtaining a new connection. Burundi reduced the time to trade across borders by enhancing its use of electronic data interchange systems, DB2013 Burundi introducing a more efficient system for monitoring goods going through transit countries and improving border coordination with neighboring transit countries. DB2013 Tanzania Tanzania made importing more difficult by introducing a Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 27 DB year Economy Reform requirement to obtain a certificate of conformity before the imported goods are shipped. Burundi made obtaining a construction permit easier by DB2013 Burundi eliminating the requirement for a clearance from the Ministry of Health and reducing the cost of the geotechnical study. Burundi made property transfers faster by establishing a DB2013 Burundi statutory time limit for processing property transfer requests at the land registry. Burundi strengthened investor protections by introducing new requirements for the approval of transactions between interested parties, by requiring greater corporate disclosure DB2012 Burundi to the board of directors and in the annual report and by making it easier to sue directors in cases of prejudicial transactions between interested parties. Kenya introduced a case management system that will help DB2012 Kenya increase the efficiency and cost-effectiveness of commercial dispute resolution. Tanzania made trading across borders faster by implementing DB2012 Tanzania the Pre-Arrival Declaration (PAD) system and electronic submission of customs declaration. Burundi amended its commercial code to establish DB2012 Burundi foreclosure procedures. Burundi made paying taxes easier for companies by reducing DB2012 Burundi the payment frequency for social security contributions from monthly to quarterly. In Rwanda the private credit bureau started to collect and distribute information from utility companies and also started DB2012 Rwanda to distribute more than 2 years of historical information, improving the credit information system. Rwanda reduced the frequency of value added tax filings by DB2012 Rwanda companies from monthly to quarterly. Rwanda made transferring property more expensive by DB2012 Rwanda enforcing the checking of the capital gains tax. Uganda increased the efficiency of property transfers by DB2012 Uganda establishing performance standards and recruiting more officials at the land office. Uganda introduced changes that added time to the process of obtaining a business license, slowing business start-up. But DB2012 Uganda it simplified registration for a tax identification number and for value added tax by introducing an online system. Rwanda made starting a business easier by reducing the DB2012 Rwanda business registration fees. Burundi made dealing with construction permits easier by DB2012 Burundi reducing the cost to obtain a geotechnical study. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 28 DB year Economy Reform Uganda made it more difficult to start a business by DB2011 Uganda increasing the trade licensing fees. Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue DB2011 Kenya Authority’s electronic data interchange system for customs clearance. Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and DB2011 Rwanda implementing new time limits for the issuance of various permits. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with DB2011 Rwanda Uganda and other neighbors, leading to an improvement in the trade logistics environment. Uganda enhanced access to credit by establishing a new DB2011 Uganda private credit bureau. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that DB2011 Rwanda loans of all sizes be reported to the central bank’s public credit registry. Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, DB2011 Kenya merging the tax and value added tax registration procedures and digitizing records at the registrar. Kenya increased the administrative burden of paying taxes by DB2011 Kenya requiring quarterly filing of payroll taxes. Uganda continues to improve the efficiency of its court DB2011 Uganda system, greatly reducing the time to file and serve a claim. Burundi made paying taxes simpler by replacing the DB2011 Burundi transactions tax with a value added tax. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 29 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse (number) many builders opt out. They may pay bribes to pass inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water and Doing Business records all procedures required for a sewerage business in the construction industry to build a warehouse along with the time and cost to complete Registering and selling the warehouse after its each procedure. In addition, this year Doing Business completion introduces a new measure, the building quality Time required to complete each procedure control index, evaluating the quality of building (calendar days) regulations, the strength of quality control and safety Does not include time spent gathering mechanisms, liability and insurance regimes, and information professional certification requirements. Each procedure starts on a separate day. The ranking of economies on the ease of dealing with Procedures that can be fully completed online construction permits is determined by sorting their are recorded as ½ day distance to frontier scores for dealing with construction permits. These scores are the simple Procedure considered completed once final document is received average of the distance to frontier scores for each of the component indicators. No prior contact with officials To make the data comparable across economies, Cost required to complete each procedure (% several assumptions about the construction of warehouse value) company, the warehouse project and the utility Official costs only, no bribes connections are used. Assumptions about the construction company Building quality control index (0-15) Sum of the scores of six component indices: The construction company (BuildCo): Quality of building regulations (0-2)  Is a limited liability company (or its legal equivalent). Quality control before construction (0-1)  Operates in the economy’s largest business Quality control during construction (0-3) city. For 11 economies the data are also Quality control after construction (0-3) collected for the second largest business city. Liability and insurance regimes (0-2)  Is 100% domestically and privately owned Professional certifications (0-4)  Has five owners, none of whom is a legal entity..   Is fully licensed and insured to carry out  construction projects, such as building  Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 30 warehouses.   The construction company (BuildCo) (continued):  Will be a new construction (there was no previous construction on the land), with no trees, natural  Has 60 builders and other employees, all of them water sources, natural reserves or historical nationals with the technical expertise and monuments of any kind on the plot. professional experience necessary to obtain construction permits and approvals.  Will have complete architectural and technical plans prepared by a licensed architect. If preparation of  Has a licensed architect and a licensed engineer, the plans requires such steps as obtaining further bothregistered with the local association of documentation or getting prior approvals from architects or engineers. BuildCo is not assumed external agencies, these are counted as procedures. to have any other employees who are technical or licensed experts, such as geological or  Will include all technical equipment required to be topographical experts. fully operational.  Has paid all taxes and taken out all necessary  Will take 30 weeks to construct (excluding all delays insurance applicable to its general business due to administrative and regulatory requirements). activity (for example, accidental insurance for  Assumptions about the utility connections construction workers and third-person liability).  The water and sewerage connections:  Owns the land on which the warehouse will be • Will be 150 meters (492 feet) from the existing built and will sell the warehouse upon its water source and sewer tap. If there is no water completion. delivery infrastructure in the economy, a borehole  Is valued at 50 times income per capita. will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be  Assumptions about the warehouse installed or built.  The warehouse:  Will not require water for fire protection reasons; a  Will be used for general storage activities, such fire extinguishing system (dry system) will be used as storage of books or stationery. The warehouse instead. If a wet fire protection system is required will not be used for any goods requiring special by law, it is assumed that the water demand conditions, such as food, chemicals or specified below also covers the water needed for pharmaceuticals. fire protection.  Will have two stories, both above ground, with a  Will have an average water use of 662 liters (175 total constructed area of approximately 1,300.6 gallons) a day and an average wastewater flow of square meters (14,000 square feet). Each floor will 568 liters (150 gallons) a day. Will have a peak be 3 meters (9 feet, 10 inches) high. water use of 1,325 liters (350 gallons) a day and a  Will have road access and be located in the peak wastewater flow of 1,136 liters (300 gallons) a day. periurban area of the economy’s largest business city (that is, on the fringes of the city but still  Will have a constant level of water demand and within its official limits). For 11 economies the wastewater flow throughout the year. data are also collected for the second largest  Will be 1 inch in diameter for the water connection business city. and 4 inches in diameter for the sewerage  • Will not be located in a special economic or connection. industrial zone. Will be located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo and is accurately registered in the cadastre and land registry. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 31 DEALING WITH CONSTRUCTION PERMITS Where do the region’s economies stand today? How easy it is for entrepreneurs in economies in East dealing with construction permits suggest an answer African Community (EAC) to legally build a warehouse? (figure 3.1). The average ranking of the region and The global rankings of these economies on the ease of comparator regions provide a useful benchmark. Figure 3.1 How economies in East African Community (EAC) rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 32 DEALING WITH CONSTRUCTION PERMITS The indicators underlying the rankings may be more the time and the cost (figure 3.2). Comparing these revealing. Data collected by Doing Business show what it indicators across the region and with averages both for takes to comply with formalities to build a warehouse in the region and for comparator regions can provide each economy in the region: the number of procedures, useful insights. Figure 3.2 What it takes to comply with formalities to build a warehouse in economies in East African Community (EAC) Procedures (number) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 33 DEALING WITH CONSTRUCTION PERMITS Time (days) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 34 DEALING WITH CONSTRUCTION PERMITS Cost (% of warehouse value) * Indicates a “no practice” mark. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 35 DEALING WITH CONSTRUCTION PERMITS Building Quality Control Index (0-15) * Indicates a “no practice” mark. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if r egulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the econom y at the bottom of the ranking on the relevant indicator. Note: The index ranges from 0 to 15, with higher values indicating better quality control and safety mechanisms in the construction permitting system. The indicator is based on the same case study assumptions as the measures of efficiency. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 36 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? Smart regulation ensures that standards are met while compliance costs reasonable, governments around the making compliance easy and accessible to all. Coherent world have worked on consolidating permitting and transparent rules, efficient processes and adequate requirements. What construction permitting reforms has allocation of resources are especially important in sectors Doing Business recorded in East African Community where safety is at stake. Construction is one of them. In (EAC) (table 3.1)? an effort to ensure building safety while keeping Table 3.1 How have economies in East African Community (EAC) made dealing with construction permits easier—or not? By Doing Business report year DB2011 to DB2017 DB year Economy Reform Kenya streamlined the process of getting electricity by introducing the use of a geographic information system DB2017 Kenya which eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain an electricity connection. Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party DB2017 Kenya transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company. Kenya made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the DB2017 Kenya debtor’s business during insolvency proceedings and by introducing regulations for insolvency practitioners. Kenya made Registering property easier by increasing the DB2017 Kenya transparency at its land registry and cadastre. Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, memorandum and articles of association . Kenya also eliminated DB2017 Kenya requirements to sign compliance declarations before a commissioner of oaths. However, Kenya also made starting a business more expensive by introducing a flat fee for company incorporation. DB2017 Rwanda Rwanda made dealing with construction permits more cumbersome and expensive by introducing new Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 37 DB year Economy Reform requirements to obtain a building permit. It also strengthen the quality control index by implementing the qualifications required for architects and engineers. Rwanda made enforcing contracts easier by introducing an DB2017 Rwanda electronic case management system for judges and lawyers. The credit bureau in Tanzania expanded credit bureau DB2017 Tanzania borrower coverage and began to distribute credit data from retailers. Rwanda made it easier to register property by introducing DB2017 Rwanda effective time limits and increasing the transparency of the land administration system. Uganda made starting a business easier by eliminating the DB2017 Uganda requirement that a commissioner of oaths must sign compliance declarations. Rwanda made starting a business easier by improving the DB2017 Rwanda online registration one-stop shop and streamlining post- registration procedures. Rwanda made trading across borders easier by removing the DB2017 Rwanda mandatory pre-shipment inspection for imported products. Uganda made trading across borders easier by constructing DB2017 Uganda the Malaba One-Stop Border Post which reduced border compliance time for exports. Uganda made paying taxes easier by eliminating a requirement for tax returns to be submitted in paper copy DB2017 Uganda following online submission. At the same time, Uganda increased the stamp duty for insurance contracts. Tanzania made paying taxes more complicated by increasing the frequency of filing of the skills Development Levy and DB2017 Tanzania more costly by introducing a workers’ compensation tariff paid by employers. Rwanda made paying taxes more complicated by DB2017 Rwanda introducing a requirement that companies file and pay social security contributions monthly instead of quarterly. Burundi made paying taxes easier by introducing a new tax DB2017 Burundi return and eliminating the personalized VAT declaration form. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 38 DB year Economy Reform In Uganda the credit bureau expanded borrower coverage, DB2016 Uganda improving access to credit information. In Rwanda the credit bureau started to provide credit scores to banks and other financial institutions while the credit DB2016 Rwanda registry expanded borrower coverage, strengthening the credit reporting system. The utility in Kenya reduced delays for new connections by DB2016 Kenya enforcing service delivery timelines and hiring contractors for meter installation. Kenya made dealing with construction permits more difficult by requiring an additional approval before issuance of the DB2016 Kenya building permit and by increasing the costs for both water and sewerage connections Kenya made property transfers faster by improving DB2016 Kenya electronic document management at the land registry and introducing a unified form for registration. Kenya made starting a business easier by reducing the time DB2016 Kenya it takes to assess and pay stamp duty. Kenya improved access to credit information by passing DB2016 Kenya legislation that allows the sharing of positive information and by expanding borrower coverage. The utility in Uganda reduced delays for new electricity connections by deploying more customer service engineers DB2016 Uganda and reducing the time needed for the inspection and meter installation. Rwanda made dealing with construction permits easier by DB2016 Rwanda adopting a new building code and new urban planning regulations. Rwanda improved its insolvency system by introducing provisions on voidable transactions and the approval of DB2016 Rwanda reorganization plans and by establishing additional safeguards for creditors in reorganization proceedings. Rwanda made paying taxes easier for companies by DB2016 Rwanda introducing electronic filing and making its use compulsory. DB2016 Rwanda Rwanda strengthened minority investor protections by introducing provisions allowing holders of 10% of a Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 39 DB year Economy Reform company’s shares to call for an extraordinary meeting of shareholders, requiring holders of special classes of shares to vote on decisions affecting their shares, requiring board members to disclose information about their directorships and primary employment and requiring that audit reports for listed companies be published in a newspaper. Rwanda made starting a business easier by eliminating the DB2016 Rwanda need for new companies to open a bank account in order to register for VAT. Uganda made starting a business easier by introducing an DB2016 Uganda online system for obtaining a trading license and by reducing business incorporation fees. Rwanda increased the time and cost for documentary and DB2016 Rwanda border compliance for importing by making preshipment inspection mandatory for all imported products. Tanzania reduced the time for both exporting and importing by implementing the Tanzania Customs Integrated System DB2016 Tanzania (TANCIS), an online system for downloading and processing customs documents. In Rwanda the electricity company made getting electricity DB2015 Rwanda less costly by eliminating several fees. Rwanda made dealing with construction permits easier by DB2015 Rwanda eliminating the fee for obtaining a freehold title and by streamlining the process for obtaining an occupancy permit. Uganda made resolving insolvency easier by consolidating all provisions related to corporate insolvency in one law, establishing provisions on the administration of companies DB2015 Uganda (reorganization), clarifying standards on the professional qualifications of insolvency practitioners and introducing provisions allowing the avoidance of undervalued transactions. Tanzania made paying taxes more complicated for companies by introducing an excise tax on money transfers. DB2015 Tanzania On the other hand, it made paying taxes less costly by reducing the rate of the skill and development levy. Tanzania made starting a business more difficult by DB2015 Tanzania increasing registration fees. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 40 DB year Economy Reform Rwanda made starting a business more difficult by requiring DB2015 Rwanda companies to buy an electronic billing machine from a certified supplier. Tanzania made trading across borders easier by upgrading DB2015 Tanzania infrastructure at the port of Dar es Salaam. Uganda made trading across borders easier by DB2015 Uganda implementing the ASYCUDA World electronic system for the submission of export and import documents. Kenya made dealing with construction permits more costly DB2015 Kenya by increasing the building permit fees. Kenya made paying taxes more costly for companies by DB2015 Kenya increasing employers’ social security contribution rate. Kenya improved its credit information system by passing legislation that allows the sharing of both positive and DB2015 Kenya negative credit information and establishes guidelines for the treatment of historical data. Rwanda improved access to credit by establishing clear priority rules outside bankruptcy for secured creditors and DB2015 Rwanda establishing clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures. Tanzania improved access to credit information by creating DB2015 Tanzania credit bureaus. Burundi made getting electricity easier by eliminating the electricity utility’s monopoly on the sale of materials needed DB2014 Burundi for new connections and by dropping the processing fee for new connections. Burundi made dealing with construction permits easier by DB2014 Burundi establishing a one-stop shop for obtaining building permits and utility connections. Burundi made paying taxes less costly for companies by DB2014 Burundi reducing corporate income tax rate. Burundi made transferring property easier by creating a one- DB2014 Burundi stop shop for property registration. DB2014 Burundi Burundi made starting a business easier by allowing Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 41 DB year Economy Reform registration with the Ministry of Labor at the one-stop shop and by speeding up the process of obtaining the registration certificate. Burundi made trading across borders easier by eliminating DB2014 Burundi the requirement for a preshipment inspection clean report of findings. Rwanda made dealing with construction permits easier and less costly by reducing the building permit fees, DB2014 Rwanda implementing an electronic platform for building permit applications and streamlining procedures. Tanzania made resolving insolvency easier through new rules clearly specifying the professional requirements and DB2014 Tanzania remuneration for insolvency practitioners, promoting reorganization proceedings and streamlining insolvency proceedings. Rwanda made resolving insolvency easier through a new law clarifying the standards for beginning insolvency proceedings; preventing the separation of the debtor’s DB2014 Rwanda assets during reorganization proceedings; setting clear time limits for the submission of a reorganization plan; and implementing an automatic stay of creditors’ enforcement actions. Rwanda made paying taxes easier and less costly for companies by rolling out its electronic filing system to the DB2014 Rwanda majority of businesses and by reducing the property tax rate and business trading license fee. Rwanda strengthened investor protections through a new DB2014 Rwanda law allowing plaintiffs to cross-examine defendants and witnesses with prior approval of the questions by the court. Rwanda made transferring property easier by eliminating the requirement to obtain a tax clearance certificate and by DB2014 Rwanda implementing the web-based Land Administration Information System for processing land transactions. Uganda made transferring property easier by eliminating the DB2014 Uganda need to have instruments of land transfer physically embossed to certify payment of the stamp duty. Rwanda made starting a business easier by reducing the DB2014 Rwanda time required to obtain a registration certificate. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 42 DB year Economy Reform Rwanda made trading across borders easier by introducing DB2014 Rwanda an electronic single-window system at the border. Tanzania improved its credit information system through new regulations that provide for the licensing of credit DB2014 Tanzania reference bureaus and outline the functions of the credit reference data bank. Rwanda strengthened its secured transactions system by providing more flexibility on the types of debts and DB2014 Rwanda obligations that can be secured through a collateral agreement. Burundi made starting a business easier by eliminating the requirements to have company documents notarized, to DB2013 Burundi publish information on new companies in a journal and to register new companies with the Ministry of Trade and Industry. Kenya made paying taxes faster for companies by enhancing DB2013 Kenya electronic filing systems. Tanzania made starting a business easier by eliminating the DB2013 Tanzania requirement for inspections by health, town and land officers as a prerequisite for a business license. Tanzania made dealing with construction permits more DB2013 Tanzania expensive by increasing the cost to obtain a building permit. Uganda made transferring property more difficult by introducing a requirement for property purchasers to obtain an income tax certificate before registration, resulting in delays at the Uganda Revenue Authority and the Ministry of DB2013 Uganda Finance. At the same time, Uganda made it easier by digitizing records at the title registry, increasing efficiency at the assessor’s office and making it possible for more banks to accept the stamp duty payment. Rwanda made enforcing contracts easier by implementing DB2013 Rwanda an electronic filing system for initial complaints. Uganda strengthened its insolvency process by clarifying rules on the creation of mortgages, establishing the duties of DB2013 Uganda mortgagors and mortgagees, defining priority rules, providing remedies for mortgagors and mortgagees and establishing the powers of receivers. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 43 DB year Economy Reform Rwanda made getting electricity easier by reducing the cost DB2013 Rwanda of obtaining a new connection. Burundi reduced the time to trade across borders by enhancing its use of electronic data interchange systems, DB2013 Burundi introducing a more efficient system for monitoring goods going through transit countries and improving border coordination with neighboring transit countries. Tanzania made importing more difficult by introducing a DB2013 Tanzania requirement to obtain a certificate of conformity before the imported goods are shipped. Burundi made obtaining a construction permit easier by DB2013 Burundi eliminating the requirement for a clearance from the Ministry of Health and reducing the cost of the geotechnical study. Burundi made property transfers faster by establishing a DB2013 Burundi statutory time limit for processing property transfer requests at the land registry. Burundi strengthened investor protections by introducing new requirements for the approval of transactions between interested parties, by requiring greater corporate disclosure DB2012 Burundi to the board of directors and in the annual report and by making it easier to sue directors in cases of prejudicial transactions between interested parties. Kenya introduced a case management system that will help DB2012 Kenya increase the efficiency and cost-effectiveness of commercial dispute resolution. Tanzania made trading across borders faster by DB2012 Tanzania implementing the Pre-Arrival Declaration (PAD) system and electronic submission of customs declaration. Burundi amended its commercial code to establish DB2012 Burundi foreclosure procedures. Burundi made paying taxes easier for companies by reducing DB2012 Burundi the payment frequency for social security contributions from monthly to quarterly. In Rwanda the private credit bureau started to collect and distribute information from utility companies and also DB2012 Rwanda started to distribute more than 2 years of historical information, improving the credit information system. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 44 DB year Economy Reform Rwanda reduced the frequency of value added tax filings by DB2012 Rwanda companies from monthly to quarterly. Rwanda made transferring property more expensive by DB2012 Rwanda enforcing the checking of the capital gains tax. Uganda increased the efficiency of property transfers by DB2012 Uganda establishing performance standards and recruiting more officials at the land office. Uganda introduced changes that added time to the process of obtaining a business license, slowing business start-up. DB2012 Uganda But it simplified registration for a tax identification number and for value added tax by introducing an online system. Rwanda made starting a business easier by reducing the DB2012 Rwanda business registration fees. Burundi made dealing with construction permits easier by DB2012 Burundi reducing the cost to obtain a geotechnical study. Uganda made it more difficult to start a business by DB2011 Uganda increasing the trade licensing fees. Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya DB2011 Kenya Revenue Authority’s electronic data interchange system for customs clearance. Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 DB2011 Rwanda and implementing new time limits for the issuance of various permits. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with DB2011 Rwanda Uganda and other neighbors, leading to an improvement in the trade logistics environment. Uganda enhanced access to credit by establishing a new DB2011 Uganda private credit bureau. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that DB2011 Rwanda loans of all sizes be reported to the central bank’s public credit registry. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 45 DB year Economy Reform Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, DB2011 Kenya merging the tax and value added tax registration procedures and digitizing records at the registrar. Kenya increased the administrative burden of paying taxes DB2011 Kenya by requiring quarterly filing of payroll taxes. Uganda continues to improve the efficiency of its court DB2011 Uganda system, greatly reducing the time to file and serve a claim. Burundi made paying taxes simpler by replacing the DB2011 Burundi transactions tax with a value added tax. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 46 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely on INDICATORS MEASURE self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity connection first step for a customer is always to gain access by (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized Obtaining external installation works and warehouse, as well as the time and cost to complete possibly purchasing material for these works them. These procedures include applications and Concluding any necessary supply contract and contracts with electricity utilities, clearances from obtaining final supply other agencies and the external and final connection works. In addition, this year Doing Business adds Time required to complete each procedure two new measures: the reliability of supply and (calendar days) transparency of tariffs index (included in the Is at least 1 calendar day aggregate distance to frontier score and ranking on Each procedure starts on a separate day the ease of doing business) and the price of electricity (omitted from these aggregate measures). Does not include time spent gathering The ranking of economies on the ease of getting information electricity is determined by sorting their distance to Reflects the time spent in practice, with little frontier scores for getting electricity. These scores follow-up and no prior contact with officials are the simple average of the distance to frontier Cost required to complete each procedure (% scores for each of the component indicators. To of income per capita) make the data comparable across economies, several assumptions are used. Official costs only, no bribes Assumptions about the warehouse Excludes value added tax The reliability of supply and transparency of The warehouse: tariffs index  Is owned by a local entrepreneur. Sum of the scores of six component indices:  Is located in the economy’s largest business city. Duration and frequency of outages For 11 economies the data are also collected for the second largest business city. Tools to monitor power outages  Is located in an area where similar warehouses Tools to restore power supply are typically located. In this area a new Regulatory monitoring of utilities’ performance electricity connection is not eligible for a special Financial deterrents aimed at limiting outages investment promotion regime (offering special subsidization or faster service, for example). Transparency and accessibility of tariffs  It is located in an area with no physical Price of electricity (cents per kilowatt-hour)* constraints. For example, the property is not Price based on monthly bill for commercial near a railway. warehouse in case study  Is a new construction and is being connected to *Price of electricity is not included in the calculation of electricity for the first time. distance to frontier nor ease of doing business ranking Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 47 The warehouse (continued):   Has two stories, both above ground, with a Assumptions about the monthly consumption total surface area of approximately 1,300.6 square meters (14,000 square feet). The plot  It is assumed that the warehouse operates 30 of land on which it is built is 929 square days a month from 9:00 a.m. to 5:00 p.m. (8 meters (10,000 square feet). hours a day), with equipment utilized at 80% of capacity on average and that there are no  Is used for storage of goods. electricity cuts (assumed for simplicity reasons).  The monthly energy consumption is 26,880 kilowatt- Assumptions about the electricity connection hours (kWh); hourly consumption is 112 kWh. The electricity connection:  If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier.  Is a permanent one.  Tariffs effective in March of the current year are  Is a three-phase, four-wire Y connection used for calculation of the price of electricity for with a subscribed capacity of 140-kilo-volt- the warehouse. Although March has 31 days, for ampere (kVA) with a power factor of 1, calculation purposes only 30 days are used. when 1 kVA = 1 kilowatt (kW   Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution network and is either overhead or underground, whichever is more common in the area where the warehouse is located.Requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.  Includes only a negligible length in the customer’s private domain.  Does not require work to install the internal wiring of the warehouse. This has already been completed up to and including the customer’s service panel or switchboard and the meter base. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 48 GETTING ELECTRICITY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in East 4.1). The average ranking of the region and comparator African Community (EAC) to connect a warehouse to regions provide a useful benchmark. electricity? The global rankings of these economies on the ease of getting electricity suggest an answer (figure Figure 4.1 How economies in East African Community (EAC) rank on the ease of getting electricity Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 49 GETTING ELECTRICITY The indicators underlying the rankings may be more time and the cost (figure 4.2). Comparing these revealing. Data collected by Doing Business show what it indicators across the region and with averages both for takes to get a new electricity connection in each the region and for comparator regions can provide economy in the region: the number of procedures, the useful insights. Figure 4.2 What it takes to get an electricity connection in economies in East African Community (EAC) Procedures (number) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 50 GETTING ELECTRICITY Time (days) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 51 GETTING ELECTRICITY Cost (% of income per capita) Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 52 GETTING ELECTRICITY Reliability of supply and transparency of tariff index (0-8) Source: Doing Business database. Note: The index ranges from 0 to 8, with higher values indicating greater reliability of electricity supply and greater transparency of tariffs. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 53 GETTING ELECTRICITY What are the changes over time? Obtaining an electricity connection is essential to enable ensure safety in the connection process while keeping a business to conduct its most basic operations. In many connection costs reasonable, governments around the economies the connection process is complicated by the world have worked to consolidate requirements for multiple laws and regulations involved—covering service obtaining an electricity connection. What reforms in quality, general safety, technical standards, procurement getting electricity has Doing Business recorded in East practices and internal wiring installations. In an effort to African Community (EAC) (table 4.1)? Table 4.1 How have economies in East African Community (EAC) made getting electricity easier—or not? By Doing Business report year DB2011 to DB2017 DB year Economy Reform Kenya streamlined the process of getting electricity by introducing the use of a geographic information system DB2017 Kenya which eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain an electricity connection. Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party DB2017 Kenya transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company. Kenya made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the DB2017 Kenya debtor’s business during insolvency proceedings and by introducing regulations for insolvency practitioners. Kenya made Registering property easier by increasing the DB2017 Kenya transparency at its land registry and cadastre. Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, memorandum and articles of association . Kenya also eliminated requirements to DB2017 Kenya sign compliance declarations before a commissioner of oaths. However, Kenya also made starting a business more expensive by introducing a flat fee for company incorporation. Rwanda made dealing with construction permits more cumbersome and expensive by introducing new requirements DB2017 Rwanda to obtain a building permit. It also strengthen the quality control index by implementing the qualifications required for architects and engineers. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 54 DB year Economy Reform Rwanda made enforcing contracts easier by introducing an DB2017 Rwanda electronic case management system for judges and lawyers. The credit bureau in Tanzania expanded credit bureau DB2017 Tanzania borrower coverage and began to distribute credit data from retailers. Rwanda made it easier to register property by introducing DB2017 Rwanda effective time limits and increasing the transparency of the land administration system. Uganda made starting a business easier by eliminating the DB2017 Uganda requirement that a commissioner of oaths must sign compliance declarations. Rwanda made starting a business easier by improving the DB2017 Rwanda online registration one-stop shop and streamlining post- registration procedures. Rwanda made trading across borders easier by removing the DB2017 Rwanda mandatory pre-shipment inspection for imported products. Uganda made trading across borders easier by constructing DB2017 Uganda the Malaba One-Stop Border Post which reduced border compliance time for exports. Uganda made paying taxes easier by eliminating a requirement for tax returns to be submitted in paper copy DB2017 Uganda following online submission. At the same time, Uganda increased the stamp duty for insurance contracts. Tanzania made paying taxes more complicated by increasing the frequency of filing of the skills Development Levy and DB2017 Tanzania more costly by introducing a workers’ compensation tariff paid by employers. Rwanda made paying taxes more complicated by introducing DB2017 Rwanda a requirement that companies file and pay social security contributions monthly instead of quarterly. Burundi made paying taxes easier by introducing a new tax DB2017 Burundi return and eliminating the personalized VAT declaration form. In Uganda the credit bureau expanded borrower coverage, DB2016 Uganda improving access to credit information. In Rwanda the credit bureau started to provide credit scores to banks and other financial institutions while the credit DB2016 Rwanda registry expanded borrower coverage, strengthening the credit reporting system. The utility in Kenya reduced delays for new connections by DB2016 Kenya enforcing service delivery timelines and hiring contractors for meter installation. Kenya made dealing with construction permits more difficult DB2016 Kenya by requiring an additional approval before issuance of the Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 55 DB year Economy Reform building permit and by increasing the costs for both water and sewerage connections Kenya made property transfers faster by improving electronic DB2016 Kenya document management at the land registry and introducing a unified form for registration. Kenya made starting a business easier by reducing the time it DB2016 Kenya takes to assess and pay stamp duty. Kenya improved access to credit information by passing DB2016 Kenya legislation that allows the sharing of positive information and by expanding borrower coverage. The utility in Uganda reduced delays for new electricity connections by deploying more customer service engineers DB2016 Uganda and reducing the time needed for the inspection and meter installation. Rwanda made dealing with construction permits easier by DB2016 Rwanda adopting a new building code and new urban planning regulations. Rwanda improved its insolvency system by introducing provisions on voidable transactions and the approval of DB2016 Rwanda reorganization plans and by establishing additional safeguards for creditors in reorganization proceedings. Rwanda made paying taxes easier for companies by DB2016 Rwanda introducing electronic filing and making its use compulsory. Rwanda strengthened minority investor protections by introducing provisions allowing holders of 10% of a company’s shares to call for an extraordinary meeting of shareholders, requiring holders of special classes of shares to DB2016 Rwanda vote on decisions affecting their shares, requiring board members to disclose information about their directorships and primary employment and requiring that audit reports for listed companies be published in a newspaper. Rwanda made starting a business easier by eliminating the DB2016 Rwanda need for new companies to open a bank account in order to register for VAT. Uganda made starting a business easier by introducing an DB2016 Uganda online system for obtaining a trading license and by reducing business incorporation fees. Rwanda increased the time and cost for documentary and DB2016 Rwanda border compliance for importing by making preshipment inspection mandatory for all imported products. Tanzania reduced the time for both exporting and importing by implementing the Tanzania Customs Integrated System DB2016 Tanzania (TANCIS), an online system for downloading and processing customs documents. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 56 DB year Economy Reform In Rwanda the electricity company made getting electricity DB2015 Rwanda less costly by eliminating several fees. Rwanda made dealing with construction permits easier by DB2015 Rwanda eliminating the fee for obtaining a freehold title and by streamlining the process for obtaining an occupancy permit. Uganda made resolving insolvency easier by consolidating all provisions related to corporate insolvency in one law, establishing provisions on the administration of companies DB2015 Uganda (reorganization), clarifying standards on the professional qualifications of insolvency practitioners and introducing provisions allowing the avoidance of undervalued transactions. Tanzania made paying taxes more complicated for companies by introducing an excise tax on money transfers. On the other DB2015 Tanzania hand, it made paying taxes less costly by reducing the rate of the skill and development levy. Tanzania made starting a business more difficult by DB2015 Tanzania increasing registration fees. Rwanda made starting a business more difficult by requiring DB2015 Rwanda companies to buy an electronic billing machine from a certified supplier. Tanzania made trading across borders easier by upgrading DB2015 Tanzania infrastructure at the port of Dar es Salaam. Uganda made trading across borders easier by implementing DB2015 Uganda the ASYCUDA World electronic system for the submission of export and import documents. Kenya made dealing with construction permits more costly by DB2015 Kenya increasing the building permit fees. Kenya made paying taxes more costly for companies by DB2015 Kenya increasing employers’ social security contribution rate. Kenya improved its credit information system by passing legislation that allows the sharing of both positive and DB2015 Kenya negative credit information and establishes guidelines for the treatment of historical data. Rwanda improved access to credit by establishing clear priority rules outside bankruptcy for secured creditors and DB2015 Rwanda establishing clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures. Tanzania improved access to credit information by creating DB2015 Tanzania credit bureaus. Burundi made getting electricity easier by eliminating the DB2014 Burundi electricity utility’s monopoly on the sale of materials needed Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 57 DB year Economy Reform for new connections and by dropping the processing fee for new connections. Burundi made dealing with construction permits easier by DB2014 Burundi establishing a one-stop shop for obtaining building permits and utility connections. Burundi made paying taxes less costly for companies by DB2014 Burundi reducing corporate income tax rate. Burundi made transferring property easier by creating a one- DB2014 Burundi stop shop for property registration. Burundi made starting a business easier by allowing registration with the Ministry of Labor at the one-stop shop DB2014 Burundi and by speeding up the process of obtaining the registration certificate. Burundi made trading across borders easier by eliminating DB2014 Burundi the requirement for a preshipment inspection clean report of findings. Rwanda made dealing with construction permits easier and less costly by reducing the building permit fees, DB2014 Rwanda implementing an electronic platform for building permit applications and streamlining procedures. Tanzania made resolving insolvency easier through new rules clearly specifying the professional requirements and DB2014 Tanzania remuneration for insolvency practitioners, promoting reorganization proceedings and streamlining insolvency proceedings. Rwanda made resolving insolvency easier through a new law clarifying the standards for beginning insolvency proceedings; preventing the separation of the debtor’s assets during DB2014 Rwanda reorganization proceedings; setting clear time limits for the submission of a reorganization plan; and implementing an automatic stay of creditors’ enforcement actions. Rwanda made paying taxes easier and less costly for companies by rolling out its electronic filing system to the DB2014 Rwanda majority of businesses and by reducing the property tax rate and business trading license fee. Rwanda strengthened investor protections through a new law DB2014 Rwanda allowing plaintiffs to cross-examine defendants and witnesses with prior approval of the questions by the court. Rwanda made transferring property easier by eliminating the requirement to obtain a tax clearance certificate and by DB2014 Rwanda implementing the web-based Land Administration Information System for processing land transactions. Uganda made transferring property easier by eliminating the DB2014 Uganda need to have instruments of land transfer physically Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 58 DB year Economy Reform embossed to certify payment of the stamp duty. Rwanda made starting a business easier by reducing the time DB2014 Rwanda required to obtain a registration certificate. Rwanda made trading across borders easier by introducing an DB2014 Rwanda electronic single-window system at the border. Tanzania improved its credit information system through new regulations that provide for the licensing of credit reference DB2014 Tanzania bureaus and outline the functions of the credit reference data bank. Rwanda strengthened its secured transactions system by providing more flexibility on the types of debts and DB2014 Rwanda obligations that can be secured through a collateral agreement. Burundi made starting a business easier by eliminating the requirements to have company documents notarized, to DB2013 Burundi publish information on new companies in a journal and to register new companies with the Ministry of Trade and Industry. Kenya made paying taxes faster for companies by enhancing DB2013 Kenya electronic filing systems. Tanzania made starting a business easier by eliminating the DB2013 Tanzania requirement for inspections by health, town and land officers as a prerequisite for a business license. Tanzania made dealing with construction permits more DB2013 Tanzania expensive by increasing the cost to obtain a building permit. Uganda made transferring property more difficult by introducing a requirement for property purchasers to obtain an income tax certificate before registration, resulting in delays at the Uganda Revenue Authority and the Ministry of DB2013 Uganda Finance. At the same time, Uganda made it easier by digitizing records at the title registry, increasing efficiency at the assessor’s office and making it possible for more banks to accept the stamp duty payment. Rwanda made enforcing contracts easier by implementing an DB2013 Rwanda electronic filing system for initial complaints. Uganda strengthened its insolvency process by clarifying rules on the creation of mortgages, establishing the duties of DB2013 Uganda mortgagors and mortgagees, defining priority rules, providing remedies for mortgagors and mortgagees and establishing the powers of receivers. Rwanda made getting electricity easier by reducing the cost DB2013 Rwanda of obtaining a new connection. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 59 DB year Economy Reform Burundi reduced the time to trade across borders by enhancing its use of electronic data interchange systems, DB2013 Burundi introducing a more efficient system for monitoring goods going through transit countries and improving border coordination with neighboring transit countries. Tanzania made importing more difficult by introducing a DB2013 Tanzania requirement to obtain a certificate of conformity before the imported goods are shipped. Burundi made obtaining a construction permit easier by DB2013 Burundi eliminating the requirement for a clearance from the Ministry of Health and reducing the cost of the geotechnical study. Burundi made property transfers faster by establishing a DB2013 Burundi statutory time limit for processing property transfer requests at the land registry. Burundi strengthened investor protections by introducing new requirements for the approval of transactions between interested parties, by requiring greater corporate disclosure DB2012 Burundi to the board of directors and in the annual report and by making it easier to sue directors in cases of prejudicial transactions between interested parties. Kenya introduced a case management system that will help DB2012 Kenya increase the efficiency and cost-effectiveness of commercial dispute resolution. Tanzania made trading across borders faster by implementing DB2012 Tanzania the Pre-Arrival Declaration (PAD) system and electronic submission of customs declaration. Burundi amended its commercial code to establish DB2012 Burundi foreclosure procedures. Burundi made paying taxes easier for companies by reducing DB2012 Burundi the payment frequency for social security contributions from monthly to quarterly. In Rwanda the private credit bureau started to collect and distribute information from utility companies and also started DB2012 Rwanda to distribute more than 2 years of historical information, improving the credit information system. Rwanda reduced the frequency of value added tax filings by DB2012 Rwanda companies from monthly to quarterly. Rwanda made transferring property more expensive by DB2012 Rwanda enforcing the checking of the capital gains tax. Uganda increased the efficiency of property transfers by DB2012 Uganda establishing performance standards and recruiting more officials at the land office. DB2012 Uganda Uganda introduced changes that added time to the process Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 60 DB year Economy Reform of obtaining a business license, slowing business start-up. But it simplified registration for a tax identification number and for value added tax by introducing an online system. Rwanda made starting a business easier by reducing the DB2012 Rwanda business registration fees. Burundi made dealing with construction permits easier by DB2012 Burundi reducing the cost to obtain a geotechnical study. Uganda made it more difficult to start a business by DB2011 Uganda increasing the trade licensing fees. Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue DB2011 Kenya Authority’s electronic data interchange system for customs clearance. Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and DB2011 Rwanda implementing new time limits for the issuance of various permits. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with DB2011 Rwanda Uganda and other neighbors, leading to an improvement in the trade logistics environment. Uganda enhanced access to credit by establishing a new DB2011 Uganda private credit bureau. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that DB2011 Rwanda loans of all sizes be reported to the central bank’s public credit registry. Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, DB2011 Kenya merging the tax and value added tax registration procedures and digitizing records at the registrar. Kenya increased the administrative burden of paying taxes by DB2011 Kenya requiring quarterly filing of payroll taxes. Uganda continues to improve the efficiency of its court DB2011 Uganda system, greatly reducing the time to file and serve a claim. Burundi made paying taxes simpler by replacing the DB2011 Burundi transactions tax with a value added tax. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 61 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. In (calendar days) addition, this year Doing Business adds a new Does not include time spent gathering measure to the set of registering property information indicators, an index of the quality of the land administration system in each economy. The Each procedure starts on a separate day. ranking of economies on the ease of registering Procedures that can be fully completed online are recorded as ½ day. property is determined by sorting their distance to frontier scores for registering property. These scores Procedure considered completed once final are the simple average of the distance to frontier document is received scores for each of the component indicators. To No prior contact with officials make the data comparable across economies, several assumptions about the parties to the Cost required to complete each procedure transaction, the property and the procedures are (% of property value) used. Official costs only, no bribes The parties (buyer and seller): No value added or capital gains taxes included  Are limited liability companies (or the legal Quality of land administration index (0-30) equivalent).1.  Is located in a periurban commercial zone, and no  Are located in the periurban area of the rezoning is required. economy’s largest business city. For 11 economies the data are also collected for the  Has no mortgages attached, has been under the second largest business city same ownership for the past 10 years.  Are 100% domestically and privately owned  Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two-story  Have 50 employees each, all of whom are warehouse of 929 square meters (10,000 square feet) nationals is located on the land. The warehouse is 10 years old,  Perform general commercial activities. is in good condition and complies with all safety standards, building codes and other legal requirements. It has no heating system. The property of land and building will be transferred in its entirety 1 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 62 The property (fully owned by the seller):  Will not be subject to renovations or additional building following the purchase.  Has a value of 50 times income per capita. The sale price equals the value and entire property  Has no trees, natural water sources, natural reserves will be transferred. or historical monuments of any kind.  Is fully owned by the seller  Will not be used for special purposes, and no special permits, such as for residential use, industrial plants,  Is registered in the land registry or cada-stre, or waste storage or certain types of agricultural both, and is free of title disputes. activities, are required.  Has no occupants, and no other party holds a legal interest in it.  . Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 63 REGISTERING PROPERTY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in East registering property suggest an answer (figure 5.1). The African Community (EAC) to transfer property? The average ranking of the region and comparator regions global rankings of these economies on the ease of provide a useful benchmark. Figure 5.1 How economies in East African Community (EAC) rank on the ease of registering property Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 64 REGISTERING PROPERTY The indicators underlying the rankings may be more time and the cost (figure 5.2). Comparing these revealing. Data collected by Doing Business show what indicators across the region and with averages both for it takes to complete a property transfer in each the region and for comparator regions can provide economy in the region: the number of procedures, the useful insights. Figure 5.2 What it takes to register property in economies in East African Community (EAC) Procedures (number) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 65 REGISTERING PROPERTY Time (days) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 66 REGISTERING PROPERTY Cost (% of property value) * Indicates a “no practice” mark. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 67 REGISTERING PROPERTY Quality of Land Administration Index (0-30) * Indicates a “no practice” mark. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “ no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Note: The index ranges from 0 to 30, with higher values indicating better quality of the land administration system. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 68 REGISTERING PROPERTY What are the changes over time? Economies worldwide have been making it easier for buyers to use or mortgage their property earlier. What entrepreneurs to register and transfer property—such as property registration reforms has Doing Business by computerizing land registries, introducing time limits recorded in East African Community (EAC) (table 5.1)? for procedures and setting low fixed fees. Many have cut the time required substantially—enabling Table 5.1 How have economies in East African Community (EAC) made registering property easier—or not? By Doing Business report year DB2011 to DB2017 DB year Economy Reform Kenya streamlined the process of getting electricity by introducing the use of a geographic information system DB2017 Kenya which eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain an electricity connection. Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party DB2017 Kenya transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company. Kenya made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the DB2017 Kenya debtor’s business during insolvency proceedings and by introducing regulations for insolvency practitioners. Kenya made Registering property easier by increasing the DB2017 Kenya transparency at its land registry and cadastre. Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, memorandum and articles of association . Kenya also eliminated requirements to DB2017 Kenya sign compliance declarations before a commissioner of oaths. However, Kenya also made starting a business more expensive by introducing a flat fee for company incorporation. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 69 DB year Economy Reform Rwanda made dealing with construction permits more cumbersome and expensive by introducing new requirements DB2017 Rwanda to obtain a building permit. It also strengthen the quality control index by implementing the qualifications required for architects and engineers. Rwanda made enforcing contracts easier by introducing an DB2017 Rwanda electronic case management system for judges and lawyers. The credit bureau in Tanzania expanded credit bureau DB2017 Tanzania borrower coverage and began to distribute credit data from retailers. Rwanda made it easier to register property by introducing DB2017 Rwanda effective time limits and increasing the transparency of the land administration system. Uganda made starting a business easier by eliminating the DB2017 Uganda requirement that a commissioner of oaths must sign compliance declarations. Rwanda made starting a business easier by improving the DB2017 Rwanda online registration one-stop shop and streamlining post- registration procedures. Rwanda made trading across borders easier by removing the DB2017 Rwanda mandatory pre-shipment inspection for imported products. Uganda made trading across borders easier by constructing DB2017 Uganda the Malaba One-Stop Border Post which reduced border compliance time for exports. Uganda made paying taxes easier by eliminating a requirement for tax returns to be submitted in paper copy DB2017 Uganda following online submission. At the same time, Uganda increased the stamp duty for insurance contracts. Tanzania made paying taxes more complicated by increasing the frequency of filing of the skills Development Levy and DB2017 Tanzania more costly by introducing a workers’ compensation tariff paid by employers. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 70 DB year Economy Reform Rwanda made paying taxes more complicated by introducing DB2017 Rwanda a requirement that companies file and pay social security contributions monthly instead of quarterly. Burundi made paying taxes easier by introducing a new tax DB2017 Burundi return and eliminating the personalized VAT declaration form. In Uganda the credit bureau expanded borrower coverage, DB2016 Uganda improving access to credit information. In Rwanda the credit bureau started to provide credit scores to banks and other financial institutions while the credit DB2016 Rwanda registry expanded borrower coverage, strengthening the credit reporting system. The utility in Kenya reduced delays for new connections by DB2016 Kenya enforcing service delivery timelines and hiring contractors for meter installation. Kenya made dealing with construction permits more difficult by requiring an additional approval before issuance of the DB2016 Kenya building permit and by increasing the costs for both water and sewerage connections Kenya made property transfers faster by improving electronic DB2016 Kenya document management at the land registry and introducing a unified form for registration. Kenya made starting a business easier by reducing the time it DB2016 Kenya takes to assess and pay stamp duty. Kenya improved access to credit information by passing DB2016 Kenya legislation that allows the sharing of positive information and by expanding borrower coverage. The utility in Uganda reduced delays for new electricity connections by deploying more customer service engineers DB2016 Uganda and reducing the time needed for the inspection and meter installation. DB2016 Rwanda Rwanda made dealing with construction permits easier by adopting a new building code and new urban planning Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 71 DB year Economy Reform regulations. Rwanda improved its insolvency system by introducing provisions on voidable transactions and the approval of DB2016 Rwanda reorganization plans and by establishing additional safeguards for creditors in reorganization proceedings. Rwanda made paying taxes easier for companies by DB2016 Rwanda introducing electronic filing and making its use compulsory. Rwanda strengthened minority investor protections by introducing provisions allowing holders of 10% of a company’s shares to call for an extraordinary meeting of shareholders, requiring holders of special classes of shares to DB2016 Rwanda vote on decisions affecting their shares, requiring board members to disclose information about their directorships and primary employment and requiring that audit reports for listed companies be published in a newspaper. Rwanda made starting a business easier by eliminating the DB2016 Rwanda need for new companies to open a bank account in order to register for VAT. Uganda made starting a business easier by introducing an DB2016 Uganda online system for obtaining a trading license and by reducing business incorporation fees. Rwanda increased the time and cost for documentary and DB2016 Rwanda border compliance for importing by making preshipment inspection mandatory for all imported products. Tanzania reduced the time for both exporting and importing by implementing the Tanzania Customs Integrated System DB2016 Tanzania (TANCIS), an online system for downloading and processing customs documents. In Rwanda the electricity company made getting electricity DB2015 Rwanda less costly by eliminating several fees. DB2015 Rwanda Rwanda made dealing with construction permits easier by eliminating the fee for obtaining a freehold title and by Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 72 DB year Economy Reform streamlining the process for obtaining an occupancy permit. Uganda made resolving insolvency easier by consolidating all provisions related to corporate insolvency in one law, establishing provisions on the administration of companies DB2015 Uganda (reorganization), clarifying standards on the professional qualifications of insolvency practitioners and introducing provisions allowing the avoidance of undervalued transactions. Tanzania made paying taxes more complicated for companies by introducing an excise tax on money transfers. On the other DB2015 Tanzania hand, it made paying taxes less costly by reducing the rate of the skill and development levy. Tanzania made starting a business more difficult by DB2015 Tanzania increasing registration fees. Rwanda made starting a business more difficult by requiring DB2015 Rwanda companies to buy an electronic billing machine from a certified supplier. Tanzania made trading across borders easier by upgrading DB2015 Tanzania infrastructure at the port of Dar es Salaam. Uganda made trading across borders easier by implementing DB2015 Uganda the ASYCUDA World electronic system for the submission of export and import documents. Kenya made dealing with construction permits more costly by DB2015 Kenya increasing the building permit fees. Kenya made paying taxes more costly for companies by DB2015 Kenya increasing employers’ social security contribution rate. Kenya improved its credit information system by passing legislation that allows the sharing of both positive and DB2015 Kenya negative credit information and establishes guidelines for the treatment of historical data. DB2015 Rwanda Rwanda improved access to credit by establishing clear priority rules outside bankruptcy for secured creditors and Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 73 DB year Economy Reform establishing clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures. Tanzania improved access to credit information by creating DB2015 Tanzania credit bureaus. Burundi made getting electricity easier by eliminating the electricity utility’s monopoly on the sale of materials needed DB2014 Burundi for new connections and by dropping the processing fee for new connections. Burundi made dealing with construction permits easier by DB2014 Burundi establishing a one-stop shop for obtaining building permits and utility connections. Burundi made paying taxes less costly for companies by DB2014 Burundi reducing corporate income tax rate. Burundi made transferring property easier by creating a one- DB2014 Burundi stop shop for property registration. Burundi made starting a business easier by allowing registration with the Ministry of Labor at the one-stop shop DB2014 Burundi and by speeding up the process of obtaining the registration certificate. Burundi made trading across borders easier by eliminating DB2014 Burundi the requirement for a preshipment inspection clean report of findings. Rwanda made dealing with construction permits easier and less costly by reducing the building permit fees, DB2014 Rwanda implementing an electronic platform for building permit applications and streamlining procedures. Tanzania made resolving insolvency easier through new rules clearly specifying the professional requirements and DB2014 Tanzania remuneration for insolvency practitioners, promoting reorganization proceedings and streamlining insolvency proceedings. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 74 DB year Economy Reform Rwanda made resolving insolvency easier through a new law clarifying the standards for beginning insolvency proceedings; preventing the separation of the debtor’s assets during DB2014 Rwanda reorganization proceedings; setting clear time limits for the submission of a reorganization plan; and implementing an automatic stay of creditors’ enforcement actions. Rwanda made paying taxes easier and less costly for companies by rolling out its electronic filing system to the DB2014 Rwanda majority of businesses and by reducing the property tax rate and business trading license fee. Rwanda strengthened investor protections through a new law DB2014 Rwanda allowing plaintiffs to cross-examine defendants and witnesses with prior approval of the questions by the court. Rwanda made transferring property easier by eliminating the requirement to obtain a tax clearance certificate and by DB2014 Rwanda implementing the web-based Land Administration Information System for processing land transactions. Uganda made transferring property easier by eliminating the DB2014 Uganda need to have instruments of land transfer physically embossed to certify payment of the stamp duty. Rwanda made starting a business easier by reducing the time DB2014 Rwanda required to obtain a registration certificate. Rwanda made trading across borders easier by introducing an DB2014 Rwanda electronic single-window system at the border. Tanzania improved its credit information system through new regulations that provide for the licensing of credit reference DB2014 Tanzania bureaus and outline the functions of the credit reference data bank. Rwanda strengthened its secured transactions system by providing more flexibility on the types of debts and DB2014 Rwanda obligations that can be secured through a collateral agreement. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 75 DB year Economy Reform Burundi made starting a business easier by eliminating the requirements to have company documents notarized, to DB2013 Burundi publish information on new companies in a journal and to register new companies with the Ministry of Trade and Industry. Kenya made paying taxes faster for companies by enhancing DB2013 Kenya electronic filing systems. Tanzania made starting a business easier by eliminating the DB2013 Tanzania requirement for inspections by health, town and land officers as a prerequisite for a business license. Tanzania made dealing with construction permits more DB2013 Tanzania expensive by increasing the cost to obtain a building permit. Uganda made transferring property more difficult by introducing a requirement for property purchasers to obtain an income tax certificate before registration, resulting in delays at the Uganda Revenue Authority and the Ministry of DB2013 Uganda Finance. At the same time, Uganda made it easier by digitizing records at the title registry, increasing efficiency at the assessor’s office and making it possible for more banks to accept the stamp duty payment. Rwanda made enforcing contracts easier by implementing an DB2013 Rwanda electronic filing system for initial complaints. Uganda strengthened its insolvency process by clarifying rules on the creation of mortgages, establishing the duties of DB2013 Uganda mortgagors and mortgagees, defining priority rules, providing remedies for mortgagors and mortgagees and establishing the powers of receivers. Rwanda made getting electricity easier by reducing the cost DB2013 Rwanda of obtaining a new connection. Burundi reduced the time to trade across borders by DB2013 Burundi enhancing its use of electronic data interchange systems, introducing a more efficient system for monitoring goods going through transit countries and improving border Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 76 DB year Economy Reform coordination with neighboring transit countries. Tanzania made importing more difficult by introducing a DB2013 Tanzania requirement to obtain a certificate of conformity before the imported goods are shipped. Burundi made obtaining a construction permit easier by DB2013 Burundi eliminating the requirement for a clearance from the Ministry of Health and reducing the cost of the geotechnical study. Burundi made property transfers faster by establishing a DB2013 Burundi statutory time limit for processing property transfer requests at the land registry. Burundi strengthened investor protections by introducing new requirements for the approval of transactions between interested parties, by requiring greater corporate disclosure DB2012 Burundi to the board of directors and in the annual report and by making it easier to sue directors in cases of prejudicial transactions between interested parties. Kenya introduced a case management system that will help DB2012 Kenya increase the efficiency and cost-effectiveness of commercial dispute resolution. Tanzania made trading across borders faster by implementing DB2012 Tanzania the Pre-Arrival Declaration (PAD) system and electronic submission of customs declaration. Burundi amended its commercial code to establish DB2012 Burundi foreclosure procedures. Burundi made paying taxes easier for companies by reducing DB2012 Burundi the payment frequency for social security contributions from monthly to quarterly. In Rwanda the private credit bureau started to collect and distribute information from utility companies and also started DB2012 Rwanda to distribute more than 2 years of historical information, improving the credit information system. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 77 DB year Economy Reform Rwanda reduced the frequency of value added tax filings by DB2012 Rwanda companies from monthly to quarterly. Rwanda made transferring property more expensive by DB2012 Rwanda enforcing the checking of the capital gains tax. Uganda increased the efficiency of property transfers by DB2012 Uganda establishing performance standards and recruiting more officials at the land office. Uganda introduced changes that added time to the process of obtaining a business license, slowing business start-up. But DB2012 Uganda it simplified registration for a tax identification number and for value added tax by introducing an online system. Rwanda made starting a business easier by reducing the DB2012 Rwanda business registration fees. Burundi made dealing with construction permits easier by DB2012 Burundi reducing the cost to obtain a geotechnical study. Uganda made it more difficult to start a business by DB2011 Uganda increasing the trade licensing fees. Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue DB2011 Kenya Authority’s electronic data interchange system for customs clearance. Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and DB2011 Rwanda implementing new time limits for the issuance of various permits. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with DB2011 Rwanda Uganda and other neighbors, leading to an improvement in the trade logistics environment. Uganda enhanced access to credit by establishing a new DB2011 Uganda private credit bureau. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 78 DB year Economy Reform Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that DB2011 Rwanda loans of all sizes be reported to the central bank’s public credit registry. Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, DB2011 Kenya merging the tax and value added tax registration procedures and digitizing records at the registrar. Kenya increased the administrative burden of paying taxes by DB2011 Kenya requiring quarterly filing of payroll taxes. Uganda continues to improve the efficiency of its court DB2011 Uganda system, greatly reducing the time to file and serve a claim. Burundi made paying taxes simpler by replacing the DB2011 Burundi transactions tax with a value added tax. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 79 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders’ rights to view a potential borrower’s financial Strength of legal rights index (0–12) history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially movable property, as security to generate capital— Depth of credit information index (0–8) while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in largest lenders with respect to secured transactions through credit bureau as percentage of adult population 2 sets of indicators. The depth of credit information Credit registry coverage (% of adults) index measures rules and practices affecting the coverage, scope and accessibility of credit Number of individuals and firms listed in credit registry as percentage of adult population information available through a credit registry or a credit bureau. The strength of legal rights index measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable  The ranking of economies on the ease of getting collateral (for more details on each case, see the Data credit is determined by sorting their distance to Notes section of the Doing Business 2017 report). frontier scores for getting credit. These scores are These scenarios assume that the borrower: the distance to frontier score for the strength of  Is a private limited liability company. legal rights index and the depth of credit  Has its headquarters and only base of operations information index. in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 80 GETTING CREDIT Where do the region’s economies stand today? How well do the credit information systems and getting credit suggest an answer (figure 6.1). The collateral and bankruptcy laws in economies in East average ranking of the region and comparator regions African Community (EAC) facilitate access to credit? The provide a useful benchmark. global rankings of these economies on the ease of Figure 6.1 How economies in East African Community (EAC) rank on the ease of getting credit Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 81 GETTING CREDIT Another way to assess how well regulations and the strength of legal rights index for East African institutions support lending and borrowing in the region Community (EAC) and comparators on the strength of is to see where the region stands in the distribution of legal rights index. Figure 6.3 shows the same thing for scores across regions. Figure 6.2 highlights the score on the depth of credit information index. Figure 6.2 How strong are legal rights for borrowers and lenders? Region scores on strength of legal rights index Note: Higher scores indicate that collateral and bankruptcy laws are better designed to facilitate access to credit. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 82 Figure 6.3 How much credit information is shared—and how widely? Region scores on depth of credit information index Note: Higher scores indicate the availability of more credit information, from either a credit registry or a credit bureau, to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 83 GETTING CREDIT What are the changes over time? When economies strengthen the legal rights of lenders information, they can increase entrepreneurs’ access to and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded increase the scope, coverage and accessibility of credit in East African Community (EAC) (table 6.1)? Table 6.1 How have economies in East African Community (EAC) made getting credit easier—or not? By Doing Business report year DB2011 to DB2017 DB year Economy Reform Kenya streamlined the process of getting electricity by introducing the use of a geographic information system DB2017 Kenya which eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain an electricity connection. Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party DB2017 Kenya transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company. Kenya made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the DB2017 Kenya debtor’s business during insolvency proceedings and by introducing regulations for insolvency practitioners. Kenya made Registering property easier by increasing the DB2017 Kenya transparency at its land registry and cadastre. Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, memorandum and articles of association . Kenya also eliminated requirements to DB2017 Kenya sign compliance declarations before a commissioner of oaths. However, Kenya also made starting a business more expensive by introducing a flat fee for company incorporation. Rwanda made dealing with construction permits more DB2017 Rwanda cumbersome and expensive by introducing new requirements to obtain a building permit. It also strengthen the quality control index by implementing the qualifications required for Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 84 DB year Economy Reform architects and engineers. Rwanda made enforcing contracts easier by introducing an DB2017 Rwanda electronic case management system for judges and lawyers. The credit bureau in Tanzania expanded credit bureau DB2017 Tanzania borrower coverage and began to distribute credit data from retailers. Rwanda made it easier to register property by introducing DB2017 Rwanda effective time limits and increasing the transparency of the land administration system. Uganda made starting a business easier by eliminating the DB2017 Uganda requirement that a commissioner of oaths must sign compliance declarations. Rwanda made starting a business easier by improving the DB2017 Rwanda online registration one-stop shop and streamlining post- registration procedures. Rwanda made trading across borders easier by removing the DB2017 Rwanda mandatory pre-shipment inspection for imported products. Uganda made trading across borders easier by constructing DB2017 Uganda the Malaba One-Stop Border Post which reduced border compliance time for exports. Uganda made paying taxes easier by eliminating a requirement for tax returns to be submitted in paper copy DB2017 Uganda following online submission. At the same time, Uganda increased the stamp duty for insurance contracts. Tanzania made paying taxes more complicated by increasing the frequency of filing of the skills Development Levy and DB2017 Tanzania more costly by introducing a workers’ co mpensation tariff paid by employers. Rwanda made paying taxes more complicated by introducing DB2017 Rwanda a requirement that companies file and pay social security contributions monthly instead of quarterly. Burundi made paying taxes easier by introducing a new tax DB2017 Burundi return and eliminating the personalized VAT declaration form. DB2016 Uganda In Uganda the credit bureau expanded borrower coverage, Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 85 DB year Economy Reform improving access to credit information. In Rwanda the credit bureau started to provide credit scores to banks and other financial institutions while the credit DB2016 Rwanda registry expanded borrower coverage, strengthening the credit reporting system. The utility in Kenya reduced delays for new connections by DB2016 Kenya enforcing service delivery timelines and hiring contractors for meter installation. Kenya made dealing with construction permits more difficult by requiring an additional approval before issuance of the DB2016 Kenya building permit and by increasing the costs for both water and sewerage connections Kenya made property transfers faster by improving electronic DB2016 Kenya document management at the land registry and introducing a unified form for registration. Kenya made starting a business easier by reducing the time it DB2016 Kenya takes to assess and pay stamp duty. Kenya improved access to credit information by passing DB2016 Kenya legislation that allows the sharing of positive information and by expanding borrower coverage. The utility in Uganda reduced delays for new electricity connections by deploying more customer service engineers DB2016 Uganda and reducing the time needed for the inspection and meter installation. Rwanda made dealing with construction permits easier by DB2016 Rwanda adopting a new building code and new urban planning regulations. Rwanda improved its insolvency system by introducing provisions on voidable transactions and the approval of DB2016 Rwanda reorganization plans and by establishing additional safeguards for creditors in reorganization proceedings. Rwanda made paying taxes easier for companies by DB2016 Rwanda introducing electronic filing and making its use compulsory. Rwanda strengthened minority investor protections by DB2016 Rwanda introducing provisions allowing holders of 10% of a company’s shares to call for an extraordinary meeting of Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 86 DB year Economy Reform shareholders, requiring holders of special classes of shares to vote on decisions affecting their shares, requiring board members to disclose information about their directorships and primary employment and requiring that audit reports for listed companies be published in a newspaper. Rwanda made starting a business easier by eliminating the DB2016 Rwanda need for new companies to open a bank account in order to register for VAT. Uganda made starting a business easier by introducing an DB2016 Uganda online system for obtaining a trading license and by reducing business incorporation fees. Rwanda increased the time and cost for documentary and DB2016 Rwanda border compliance for importing by making preshipment inspection mandatory for all imported products. Tanzania reduced the time for both exporting and importing by implementing the Tanzania Customs Integrated System DB2016 Tanzania (TANCIS), an online system for downloading and processing customs documents. In Rwanda the electricity company made getting electricity DB2015 Rwanda less costly by eliminating several fees. Rwanda made dealing with construction permits easier by DB2015 Rwanda eliminating the fee for obtaining a freehold title and by streamlining the process for obtaining an occupancy permit. Uganda made resolving insolvency easier by consolidating all provisions related to corporate insolvency in one law, establishing provisions on the administration of companies DB2015 Uganda (reorganization), clarifying standards on the professional qualifications of insolvency practitioners and introducing provisions allowing the avoidance of undervalued transactions. Tanzania made paying taxes more complicated for companies by introducing an excise tax on money transfers. On the other DB2015 Tanzania hand, it made paying taxes less costly by reducing the rate of the skill and development levy. Tanzania made starting a business more difficult by DB2015 Tanzania increasing registration fees. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 87 DB year Economy Reform Rwanda made starting a business more difficult by requiring DB2015 Rwanda companies to buy an electronic billing machine from a certified supplier. Tanzania made trading across borders easier by upgrading DB2015 Tanzania infrastructure at the port of Dar es Salaam. Uganda made trading across borders easier by implementing DB2015 Uganda the ASYCUDA World electronic system for the submission of export and import documents. Kenya made dealing with construction permits more costly by DB2015 Kenya increasing the building permit fees. Kenya made paying taxes more costly for companies by DB2015 Kenya increasing employers’ social security contribution rate. Kenya improved its credit information system by passing legislation that allows the sharing of both positive and DB2015 Kenya negative credit information and establishes guidelines for the treatment of historical data. Rwanda improved access to credit by establishing clear priority rules outside bankruptcy for secured creditors and DB2015 Rwanda establishing clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures. Tanzania improved access to credit information by creating DB2015 Tanzania credit bureaus. Burundi made getting electricity easier by eliminating the electricity utility’s monopoly on the sale of materials needed DB2014 Burundi for new connections and by dropping the processing fee for new connections. Burundi made dealing with construction permits easier by DB2014 Burundi establishing a one-stop shop for obtaining building permits and utility connections. Burundi made paying taxes less costly for companies by DB2014 Burundi reducing corporate income tax rate. Burundi made transferring property easier by creating a one- DB2014 Burundi stop shop for property registration. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 88 DB year Economy Reform Burundi made starting a business easier by allowing registration with the Ministry of Labor at the one-stop shop DB2014 Burundi and by speeding up the process of obtaining the registration certificate. Burundi made trading across borders easier by eliminating DB2014 Burundi the requirement for a preshipment inspection clean report of findings. Rwanda made dealing with construction permits easier and less costly by reducing the building permit fees, DB2014 Rwanda implementing an electronic platform for building permit applications and streamlining procedures. Tanzania made resolving insolvency easier through new rules clearly specifying the professional requirements and DB2014 Tanzania remuneration for insolvency practitioners, promoting reorganization proceedings and streamlining insolvency proceedings. Rwanda made resolving insolvency easier through a new law clarifying the standards for beginning insolvency proceedings; preventing the separation of the debtor’s assets during DB2014 Rwanda reorganization proceedings; setting clear time limits for the submission of a reorganization plan; and implementing an automatic stay of creditors’ enforcement actions. Rwanda made paying taxes easier and less costly for companies by rolling out its electronic filing system to the DB2014 Rwanda majority of businesses and by reducing the property tax rate and business trading license fee. Rwanda strengthened investor protections through a new law DB2014 Rwanda allowing plaintiffs to cross-examine defendants and witnesses with prior approval of the questions by the court. Rwanda made transferring property easier by eliminating the requirement to obtain a tax clearance certificate and by DB2014 Rwanda implementing the web-based Land Administration Information System for processing land transactions. Uganda made transferring property easier by eliminating the DB2014 Uganda need to have instruments of land transfer physically embossed to certify payment of the stamp duty. DB2014 Rwanda Rwanda made starting a business easier by reducing the time Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 89 DB year Economy Reform required to obtain a registration certificate. Rwanda made trading across borders easier by introducing an DB2014 Rwanda electronic single-window system at the border. Tanzania improved its credit information system through new regulations that provide for the licensing of credit reference DB2014 Tanzania bureaus and outline the functions of the credit reference data bank. Rwanda strengthened its secured transactions system by providing more flexibility on the types of debts and DB2014 Rwanda obligations that can be secured through a collateral agreement. Burundi made starting a business easier by eliminating the requirements to have company documents notarized, to DB2013 Burundi publish information on new companies in a journal and to register new companies with the Ministry of Trade and Industry. Kenya made paying taxes faster for companies by enhancing DB2013 Kenya electronic filing systems. Tanzania made starting a business easier by eliminating the DB2013 Tanzania requirement for inspections by health, town and land officers as a prerequisite for a business license. Tanzania made dealing with construction permits more DB2013 Tanzania expensive by increasing the cost to obtain a building permit. Uganda made transferring property more difficult by introducing a requirement for property purchasers to obtain an income tax certificate before registration, resulting in delays at the Uganda Revenue Authority and the Ministry of DB2013 Uganda Finance. At the same time, Uganda made it easier by digitizing records at the title registry, increasing efficiency at the assessor’s office and making it possible for more banks to accept the stamp duty payment. Rwanda made enforcing contracts easier by implementing an DB2013 Rwanda electronic filing system for initial complaints. Uganda strengthened its insolvency process by clarifying DB2013 Uganda rules on the creation of mortgages, establishing the duties of mortgagors and mortgagees, defining priority rules, providing remedies for mortgagors and mortgagees and Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 90 DB year Economy Reform establishing the powers of receivers. Rwanda made getting electricity easier by reducing the cost DB2013 Rwanda of obtaining a new connection. Burundi reduced the time to trade across borders by enhancing its use of electronic data interchange systems, DB2013 Burundi introducing a more efficient system for monitoring goods going through transit countries and improving border coordination with neighboring transit countries. Tanzania made importing more difficult by introducing a DB2013 Tanzania requirement to obtain a certificate of conformity before the imported goods are shipped. Burundi made obtaining a construction permit easier by DB2013 Burundi eliminating the requirement for a clearance from the Ministry of Health and reducing the cost of the geotechnical study. Burundi made property transfers faster by establishing a DB2013 Burundi statutory time limit for processing property transfer requests at the land registry. Burundi strengthened investor protections by introducing new requirements for the approval of transactions between interested parties, by requiring greater corporate disclosure DB2012 Burundi to the board of directors and in the annual report and by making it easier to sue directors in cases of prejudicial transactions between interested parties. Kenya introduced a case management system that will help DB2012 Kenya increase the efficiency and cost-effectiveness of commercial dispute resolution. Tanzania made trading across borders faster by implementing DB2012 Tanzania the Pre-Arrival Declaration (PAD) system and electronic submission of customs declaration. Burundi amended its commercial code to establish DB2012 Burundi foreclosure procedures. Burundi made paying taxes easier for companies by reducing DB2012 Burundi the payment frequency for social security contributions from monthly to quarterly. DB2012 Rwanda In Rwanda the private credit bureau started to collect and distribute information from utility companies and also started Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 91 DB year Economy Reform to distribute more than 2 years of historical information, improving the credit information system. Rwanda reduced the frequency of value added tax filings by DB2012 Rwanda companies from monthly to quarterly. Rwanda made transferring property more expensive by DB2012 Rwanda enforcing the checking of the capital gains tax. Uganda increased the efficiency of property transfers by DB2012 Uganda establishing performance standards and recruiting more officials at the land office. Uganda introduced changes that added time to the process of obtaining a business license, slowing business start-up. But DB2012 Uganda it simplified registration for a tax identification number and for value added tax by introducing an online system. Rwanda made starting a business easier by reducing the DB2012 Rwanda business registration fees. Burundi made dealing with construction permits easier by DB2012 Burundi reducing the cost to obtain a geotechnical study. Uganda made it more difficult to start a business by DB2011 Uganda increasing the trade licensing fees. Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue DB2011 Kenya Authority’s electronic data interchange system for customs clearance. Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and DB2011 Rwanda implementing new time limits for the issuance of various permits. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with DB2011 Rwanda Uganda and other neighbors, leading to an improvement in the trade logistics environment. Uganda enhanced access to credit by establishing a new DB2011 Uganda private credit bureau. DB2011 Rwanda Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 92 DB year Economy Reform loans of all sizes be reported to the central bank’s public credit registry. Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, DB2011 Kenya merging the tax and value added tax registration procedures and digitizing records at the registrar. Kenya increased the administrative burden of paying taxes by DB2011 Kenya requiring quarterly filing of payroll taxes. Uganda continues to improve the efficiency of its court DB2011 Uganda system, greatly reducing the time to file and serve a claim. Burundi made paying taxes simpler by replacing the DB2011 Burundi transactions tax with a value added tax. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 93 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of WHAT THE PROTECTING MINORITY INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. Effective regulations define related-party transactions precisely, promote clear and efficient disclosure requirements, require Extent of disclosure index (0–10) shareholder participation in major decisions of the Review and approval requirements for related-party company and set detailed standards of accountability transactions ; Disclosure requirements for related-party for company insiders. transactions What do the indicators cover? Extent of director liability index (0–10) Doing Business measures the protection of minority Ability of minority shareholders to sue and hold interested investors from conflicts of interest through one set of directors liable for prejudicial related-party transactions; indicators and shareholders’ rights in corporate Available legal remedies (damages, disgorgement of profits, governance through another. The ranking of economies fines, imprisonment, rescission of the transaction) on the strength of minority investor protections is determined by sorting their distance to frontier scores Ease of shareholder suits index (0–10) for protecting minority investors. These scores are the Access to internal corporate documents; Evidence simple average of the distance to frontier scores for the obtainable during trial and allocation of legal expenses extent of conflict of interest regulation index and the Extent of conflict of interest regulation index extent of shareholder governance index. To make the (0–10) data comparable across economies, a case study uses Simple average of the extent of disclosure, extent of director several assumptions about the business and the liability and ease of shareholder indices transaction. Extent of shareholder rights index (0-10) The business (Buyer): Shareholders’ rights and role in major corporate decisions  Is a publicly traded corporation listed on the economy’s most important stock exchange. If Extent of ownership and control index (0-10) the number of publicly traded companies listed Governance safeguards protecting shareholders from undue on that exchange is less than 10, or if there is board control and entrenchment no stock exchange in the economy, it is Extent of corporate transparency index (0-10) assumed that Buyer is a large private company with multiple shareholders. Corporate transparency on ownership stakes, compensation,  Has a board of directors and a chief executive audits and financial prospects officer (CEO) who may legally act on behalf of Extent of shareholder governance index (0– Buyer where permitted, even if this is not 10) specifically required by law. Simple average of the extent of shareholders rights, extent  Has a supervisory board (applicable to of ownership and control and extent of corporate economies with a two-tier board system) on transparency indices which 60% of the shareholder-elected Strength of investor protection index (0–10) members have been appointed by Mr. James, who is Buyer’s controlling shareholder and a Simple average of the extent of conflict of interest regulation and extent of shareholder governance indices member of Buyer’s board of directors.  Has not adopted any bylaws or articles of association that differ from default minimum  standards and does not follow any nonmandatory codes, principles, Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 94 recommendations or guidelines relating to corporate governance.  Is a manufacturing company with its own distribution network The transaction involves the following details:  Mr. James owns 60% of Buyer and elected two directors to Buyer’s five-member board.  Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores.  Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of Buyer’s assets and is higher than the market value.  The proposed transaction is part of the company’s ordinary course of business and is not outside the authority of the company.  Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made (that is, the transaction is not fraudulent).  The transaction causes damages to Buyer. Shareholders sue Mr. James and the other parties that approved the transaction. . Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 95 PROTECTING MINORITY INVESTORS Where do the region’s economies stand today? How strong are investor protections against self-dealing to the protection of minority investors, a higher ranking in economies in East African Community (EAC)? The does indicate that an economy’s regulations offer global rankings of these economies on the strength of stronger investor protections against self-dealing in the investor protection index suggest an answer (figure 7.1). areas measured. While the indicator does not measure all aspects related Figure 7.1 How economies in East African Community (EAC) rank on the strength of investor protection index Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 96 PROTECTING MINORITY INVESTORS The strength of minority investor protection index is the highlight the scores on the various minority investor average of the extent of conflict of interest regulation protection indices for East African Community (EAC). index and the extent of shareholder governance index. Comparing the scores across the region and with The index ranges from 0 to 10, rounded to the nearest averages both for the region and for comparator regions decimal place, with higher values indicating stronger can provide useful insights. minority investor protections. Figures 7.2 and 7.3 Figure 7.2 How extensive are conflict of interest regulations? Extent of conflict of interest regulation index (0-10) Note: Higher values indicate stronger regulation of conflicts of interest. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 97 Figure 7.3 How extensive is shareholder governance? Extent of shareholder governance index (0-10) Note: Higher scores indicate stronger rights of shareholders in corporate governance. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 98 PROTECTING MINORITY INVESTORS What are the changes over time? Economies with the strongest protections of minority reforms to strengthen minority investor protections may investors from self-dealing require detailed disclosure move ahead on different fronts—such as through new or and define clear duties for directors. They also have well- amended company laws, securities regulations or functioning courts and up-to-date procedural rules that revisions to court procedures. What minority investor give minority shareholders the means to prove their case protection reforms has Doing Business recorded in East and obtain a judgment within a reasonable time. So African Community (EAC) (table 7.1)? Table 7.1 How have economies in East African Community (EAC) strengthened minority investor protections—or not? By Doing Business report year DB2011 to DB2017 DB year Economy Reform Kenya streamlined the process of getting electricity by introducing the use of a geographic information system DB2017 Kenya which eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain an electricity connection. Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party DB2017 Kenya transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company. Kenya made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the DB2017 Kenya debtor’s business during insolvency proceedings and by introducing regulations for insolvency practitioners. Kenya made Registering property easier by increasing the DB2017 Kenya transparency at its land registry and cadastre. Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, memorandum and articles of association . Kenya also eliminated requirements to DB2017 Kenya sign compliance declarations before a commissioner of oaths. However, Kenya also made starting a business more expensive by introducing a flat fee for company incorporation. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 99 DB year Economy Reform Rwanda made dealing with construction permits more cumbersome and expensive by introducing new requirements DB2017 Rwanda to obtain a building permit. It also strengthen the quality control index by implementing the qualifications required for architects and engineers. Rwanda made enforcing contracts easier by introducing an DB2017 Rwanda electronic case management system for judges and lawyers. The credit bureau in Tanzania expanded credit bureau DB2017 Tanzania borrower coverage and began to distribute credit data from retailers. Rwanda made it easier to register property by introducing DB2017 Rwanda effective time limits and increasing the transparency of the land administration system. Uganda made starting a business easier by eliminating the DB2017 Uganda requirement that a commissioner of oaths must sign compliance declarations. Rwanda made starting a business easier by improving the DB2017 Rwanda online registration one-stop shop and streamlining post- registration procedures. Rwanda made trading across borders easier by removing the DB2017 Rwanda mandatory pre-shipment inspection for imported products. Uganda made trading across borders easier by constructing DB2017 Uganda the Malaba One-Stop Border Post which reduced border compliance time for exports. Uganda made paying taxes easier by eliminating a requirement for tax returns to be submitted in paper copy DB2017 Uganda following online submission. At the same time, Uganda increased the stamp duty for insurance contracts. Tanzania made paying taxes more complicated by increasing the frequency of filing of the skills Development Levy and DB2017 Tanzania more costly by introducing a workers’ compensation tariff paid by employers. DB2017 Rwanda Rwanda made paying taxes more complicated by introducing a requirement that companies file and pay social security Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 100 DB year Economy Reform contributions monthly instead of quarterly. Burundi made paying taxes easier by introducing a new tax DB2017 Burundi return and eliminating the personalized VAT declaration form. In Uganda the credit bureau expanded borrower coverage, DB2016 Uganda improving access to credit information. In Rwanda the credit bureau started to provide credit scores to banks and other financial institutions while the credit DB2016 Rwanda registry expanded borrower coverage, strengthening the credit reporting system. The utility in Kenya reduced delays for new connections by DB2016 Kenya enforcing service delivery timelines and hiring contractors for meter installation. Kenya made dealing with construction permits more difficult by requiring an additional approval before issuance of the DB2016 Kenya building permit and by increasing the costs for both water and sewerage connections Kenya made property transfers faster by improving electronic DB2016 Kenya document management at the land registry and introducing a unified form for registration. Kenya made starting a business easier by reducing the time it DB2016 Kenya takes to assess and pay stamp duty. Kenya improved access to credit information by passing DB2016 Kenya legislation that allows the sharing of positive information and by expanding borrower coverage. The utility in Uganda reduced delays for new electricity connections by deploying more customer service engineers DB2016 Uganda and reducing the time needed for the inspection and meter installation. Rwanda made dealing with construction permits easier by DB2016 Rwanda adopting a new building code and new urban planning regulations. Rwanda improved its insolvency system by introducing DB2016 Rwanda provisions on voidable transactions and the approval of reorganization plans and by establishing additional Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 101 DB year Economy Reform safeguards for creditors in reorganization proceedings. Rwanda made paying taxes easier for companies by DB2016 Rwanda introducing electronic filing and making its use compulsory. Rwanda strengthened minority investor protections by introducing provisions allowing holders of 10% of a company’s shares to call for an extraordinary meeting of shareholders, requiring holders of special classes of shares to DB2016 Rwanda vote on decisions affecting their shares, requiring board members to disclose information about their directorships and primary employment and requiring that audit reports for listed companies be published in a newspaper. Rwanda made starting a business easier by eliminating the DB2016 Rwanda need for new companies to open a bank account in order to register for VAT. Uganda made starting a business easier by introducing an DB2016 Uganda online system for obtaining a trading license and by reducing business incorporation fees. Rwanda increased the time and cost for documentary and DB2016 Rwanda border compliance for importing by making preshipment inspection mandatory for all imported products. Tanzania reduced the time for both exporting and importing by implementing the Tanzania Customs Integrated System DB2016 Tanzania (TANCIS), an online system for downloading and processing customs documents. In Rwanda the electricity company made getting electricity DB2015 Rwanda less costly by eliminating several fees. Rwanda made dealing with construction permits easier by DB2015 Rwanda eliminating the fee for obtaining a freehold title and by streamlining the process for obtaining an occupancy permit. Uganda made resolving insolvency easier by consolidating all provisions related to corporate insolvency in one law, DB2015 Uganda establishing provisions on the administration of companies (reorganization), clarifying standards on the professional qualifications of insolvency practitioners and introducing provisions allowing the avoidance of undervalued Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 102 DB year Economy Reform transactions. Tanzania made paying taxes more complicated for companies by introducing an excise tax on money transfers. On the other DB2015 Tanzania hand, it made paying taxes less costly by reducing the rate of the skill and development levy. Tanzania made starting a business more difficult by DB2015 Tanzania increasing registration fees. Rwanda made starting a business more difficult by requiring DB2015 Rwanda companies to buy an electronic billing machine from a certified supplier. Tanzania made trading across borders easier by upgrading DB2015 Tanzania infrastructure at the port of Dar es Salaam. Uganda made trading across borders easier by implementing DB2015 Uganda the ASYCUDA World electronic system for the submission of export and import documents. Kenya made dealing with construction permits more costly by DB2015 Kenya increasing the building permit fees. Kenya made paying taxes more costly for companies by DB2015 Kenya increasing employers’ social security contribution rate. Kenya improved its credit information system by passing legislation that allows the sharing of both positive and DB2015 Kenya negative credit information and establishes guidelines for the treatment of historical data. Rwanda improved access to credit by establishing clear priority rules outside bankruptcy for secured creditors and DB2015 Rwanda establishing clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures. Tanzania improved access to credit information by creating DB2015 Tanzania credit bureaus. Burundi made getting electricity easier by eliminating the DB2014 Burundi electricity utility’s monopoly on the sale of materials needed for new connections and by dropping the processing fee for Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 103 DB year Economy Reform new connections. Burundi made dealing with construction permits easier by DB2014 Burundi establishing a one-stop shop for obtaining building permits and utility connections. Burundi made paying taxes less costly for companies by DB2014 Burundi reducing corporate income tax rate. Burundi made transferring property easier by creating a one- DB2014 Burundi stop shop for property registration. Burundi made starting a business easier by allowing registration with the Ministry of Labor at the one-stop shop DB2014 Burundi and by speeding up the process of obtaining the registration certificate. Burundi made trading across borders easier by eliminating DB2014 Burundi the requirement for a preshipment inspection clean report of findings. Rwanda made dealing with construction permits easier and less costly by reducing the building permit fees, DB2014 Rwanda implementing an electronic platform for building permit applications and streamlining procedures. Tanzania made resolving insolvency easier through new rules clearly specifying the professional requirements and DB2014 Tanzania remuneration for insolvency practitioners, promoting reorganization proceedings and streamlining insolvency proceedings. Rwanda made resolving insolvency easier through a new law clarifying the standards for beginning insolvency proceedings; preventing the separation of the debtor’s assets during DB2014 Rwanda reorganization proceedings; setting clear time limits for the submission of a reorganization plan; and implementing an automatic stay of creditors’ enforcement actions. Rwanda made paying taxes easier and less costly for companies by rolling out its electronic filing system to the DB2014 Rwanda majority of businesses and by reducing the property tax rate and business trading license fee. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 104 DB year Economy Reform Rwanda strengthened investor protections through a new law DB2014 Rwanda allowing plaintiffs to cross-examine defendants and witnesses with prior approval of the questions by the court. Rwanda made transferring property easier by eliminating the requirement to obtain a tax clearance certificate and by DB2014 Rwanda implementing the web-based Land Administration Information System for processing land transactions. Uganda made transferring property easier by eliminating the DB2014 Uganda need to have instruments of land transfer physically embossed to certify payment of the stamp duty. Rwanda made starting a business easier by reducing the time DB2014 Rwanda required to obtain a registration certificate. Rwanda made trading across borders easier by introducing an DB2014 Rwanda electronic single-window system at the border. Tanzania improved its credit information system through new regulations that provide for the licensing of credit reference DB2014 Tanzania bureaus and outline the functions of the credit reference data bank. Rwanda strengthened its secured transactions system by providing more flexibility on the types of debts and DB2014 Rwanda obligations that can be secured through a collateral agreement. Burundi made starting a business easier by eliminating the requirements to have company documents notarized, to DB2013 Burundi publish information on new companies in a journal and to register new companies with the Ministry of Trade and Industry. Kenya made paying taxes faster for companies by enhancing DB2013 Kenya electronic filing systems. Tanzania made starting a business easier by eliminating the DB2013 Tanzania requirement for inspections by health, town and land officers as a prerequisite for a business license. Tanzania made dealing with construction permits more DB2013 Tanzania expensive by increasing the cost to obtain a building permit. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 105 DB year Economy Reform Uganda made transferring property more difficult by introducing a requirement for property purchasers to obtain an income tax certificate before registration, resulting in delays at the Uganda Revenue Authority and the Ministry of DB2013 Uganda Finance. At the same time, Uganda made it easier by digitizing records at the title registry, increasing efficiency at the assessor’s office and making it possible for more banks to accept the stamp duty payment. Rwanda made enforcing contracts easier by implementing an DB2013 Rwanda electronic filing system for initial complaints. Uganda strengthened its insolvency process by clarifying rules on the creation of mortgages, establishing the duties of DB2013 Uganda mortgagors and mortgagees, defining priority rules, providing remedies for mortgagors and mortgagees and establishing the powers of receivers. Rwanda made getting electricity easier by reducing the cost DB2013 Rwanda of obtaining a new connection. Burundi reduced the time to trade across borders by enhancing its use of electronic data interchange systems, DB2013 Burundi introducing a more efficient system for monitoring goods going through transit countries and improving border coordination with neighboring transit countries. Tanzania made importing more difficult by introducing a DB2013 Tanzania requirement to obtain a certificate of conformity before the imported goods are shipped. Burundi made obtaining a construction permit easier by DB2013 Burundi eliminating the requirement for a clearance from the Ministry of Health and reducing the cost of the geotechnical study. Burundi made property transfers faster by establishing a DB2013 Burundi statutory time limit for processing property transfer requests at the land registry. Burundi strengthened investor protections by introducing new requirements for the approval of transactions between DB2012 Burundi interested parties, by requiring greater corporate disclosure to the board of directors and in the annual report and by making it easier to sue directors in cases of prejudicial Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 106 DB year Economy Reform transactions between interested parties. Kenya introduced a case management system that will help DB2012 Kenya increase the efficiency and cost-effectiveness of commercial dispute resolution. Tanzania made trading across borders faster by implementing DB2012 Tanzania the Pre-Arrival Declaration (PAD) system and electronic submission of customs declaration. Burundi amended its commercial code to establish DB2012 Burundi foreclosure procedures. Burundi made paying taxes easier for companies by reducing DB2012 Burundi the payment frequency for social security contributions from monthly to quarterly. In Rwanda the private credit bureau started to collect and distribute information from utility companies and also started DB2012 Rwanda to distribute more than 2 years of historical information, improving the credit information system. Rwanda reduced the frequency of value added tax filings by DB2012 Rwanda companies from monthly to quarterly. Rwanda made transferring property more expensive by DB2012 Rwanda enforcing the checking of the capital gains tax. Uganda increased the efficiency of property transfers by DB2012 Uganda establishing performance standards and recruiting more officials at the land office. Uganda introduced changes that added time to the process of obtaining a business license, slowing business start-up. But DB2012 Uganda it simplified registration for a tax identification number and for value added tax by introducing an online system. Rwanda made starting a business easier by reducing the DB2012 Rwanda business registration fees. Burundi made dealing with construction permits easier by DB2012 Burundi reducing the cost to obtain a geotechnical study. DB2011 Uganda Uganda made it more difficult to start a business by Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 107 DB year Economy Reform increasing the trade licensing fees. Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue DB2011 Kenya Authority’s electronic data interchange system for customs clearance. Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and DB2011 Rwanda implementing new time limits for the issuance of various permits. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with DB2011 Rwanda Uganda and other neighbors, leading to an improvement in the trade logistics environment. Uganda enhanced access to credit by establishing a new DB2011 Uganda private credit bureau. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that DB2011 Rwanda loans of all sizes be reported to the central bank’s public credit registry. Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, DB2011 Kenya merging the tax and value added tax registration procedures and digitizing records at the registrar. Kenya increased the administrative burden of paying taxes by DB2011 Kenya requiring quarterly filing of payroll taxes. Uganda continues to improve the efficiency of its court DB2011 Uganda system, greatly reducing the time to file and serve a claim. Burundi made paying taxes simpler by replacing the DB2011 Burundi transactions tax with a value added tax. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 108 WHAT THE PAYING TAXES INDICATORS PAYING TAXES Taxes are essential. The level of tax rates needs to MEASURE be carefully chosen—and needless complexity in tax rules avoided. Firms in economies that rank Tax payments for a manufacturing company better on the ease of paying taxes in the Doing in 2014 (number per year adjusted for Business study tend to perceive both tax rates and electronic and joint filing and payment) tax administration as less of an obstacle to Total number of taxes and contributions paid, business according to the World Bank Enterprise including consumption taxes (value added tax, Survey research. sales tax or goods and service tax) Method and frequency of filing and payment What do the indicators cover? Time required to comply with 3 major taxes Using a case scenario, Doing Business records the (hours per year) taxes and mandatory contributions that a medium- size company must pay in a given year as well as Collecting information and computing the tax measures of the administrative burden of paying payable taxes and contributions and dealing with postfiling Completing tax return forms, filing with processes. This case scenario uses a set of financial proper agencies statements and assumptions about transactions Arranging payment or withholding made over the year. Information is also compiled on the frequency of filing and payments, time taken to Preparing separate tax accounting books, if comply with tax laws, time taken to comply with the required requirements of postfiling processes and time Total tax rate (% of profit before all taxes) waiting for these processes to be completed. The ranking of economies on the ease of paying taxes is Profit or corporate income tax determined by sorting their distance to frontier Social contributions and labor taxes paid by scores on the ease of paying taxes. These scores are the employer the simple average of the distance to frontier scores Property and property transfer taxes for each of the four component indicators – number of tax payments. time, total tax rate and postfiling Dividend, capital gains and financial index – with a threshold and a nonlinear transactions taxes transformation applied to one of the component Waste collection, vehicle, road and other taxes indicators, the total tax rate2. If both VAT (or GST) Postfiling Index and corporate income tax apply, the postfiling index is the simple average of the distance to frontier sores The time to comply with a VAT or GST refund for each of the four components: the time to comply The time to receive a VAT or GST refund with a VAT or GST refund, the time to obtain a VAT The time to comply with a corporate income or GST refund, the time to comply with a corporate tax audit income tax audit and the time to complete a The time to complete a corporate income corporate income tax audit. If only VAT (or GST) or tax audit corporate income applies, the postfiling index is the simple average of the scores for only the two components pertaining to the applicable tax. If  neither VAT (or GST) nor corporate income tax  applies, the postfiling index is not included in the ranking of the ease of paying taxes.  2 The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 109  Taxes and mandatory contributions include Assumptions about the corporate income tax corporate income tax, turnover tax and all labor audit process: taxes and contributions paid by the company. A range of standard deductions and exemptions  An error in the calculation of the income tax liability are also recorded. (for example, use of incorrect tax depreciation rates, or incorrectly treating an expense as tax deductible) All financial statement variables are proportional to leads to an incorrect income tax return and 2012 income per capita. To make the data consequently an underpayment of corporate comparable across economies, several assumptions income tax. are used.  TaxpayerCo. discovered the error and voluntarily  TaxpayerCo is a medium-size business that notified the tax authority of the error in the started operations on January 1, 2014. corporate income tax return.  The business starts from the same financial  position in each economy. All the taxes and mandatory contributions paid during the second  year of operation are recorded.   Taxes and mandatory contributions are measured at all levels of government. Assumptions about the VAT refund process:  In June 2015, TaxpayerCo. makes a large capital purchase: one additional machine for manufacturing pots.  The value of the machine is 65 times income per capita of the economy.  Sales are equally spread per month (that is, 1,050 times income per capita divided by 12).  Cost of goods sold are equally expensed per month (that is, 875 times income per capita divided by 12).  The seller of the machinery is registered for VAT or general sales tax (GST).  Excess input VAT incurred in June will be fully recovered after four consecutive months if the VAT or GST rate is the same for inputs, sales and the machine and the tax reporting period is every month.   Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 110 PAYING TAXES Where do the region’s economies stand today? What is the administrative burden of complying with offer useful information for assessing the tax compliance taxes in economies in East African Community (EAC)— burden for businesses (figure 8.1). The average ranking and how much do firms pay in taxes? The global of the region provides a useful benchmark. rankings of these economies on the ease of paying taxes Figure 8.1 How economies in East African Community (EAC) rank on the ease of paying taxes Note: All economies with a total tax rate below the threshold of 26.1% applied in DB2015, receive the same distance to frontier score for the total tax rate (a distance to frontier score of 100 for the total tax rate) for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 111 PAYING TAXES The indicators underlying the rankings may be more major taxes (corporate income tax, VAT or sales tax and revealing. Data collected by Doing Business show what it labor taxes and mandatory contributions)—as well as the takes to comply with tax regulations in each economy in total tax rate (figure 8.2). Comparing these indicators the region—the number of payments per year and the across the region and with averages both for the region time required to prepare, and file and pay taxes the 3 and for comparator regions can provide useful insights. Figure 8.2 How easy is it to pay taxes in economies in East African Community (EAC)—and what are the total tax rates? Payments (number per year) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 112 PAYING TAXES Time (hours per year) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 113 PAYING TAXES Total tax rate (% of profit) Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 114 PAYING TAXES Postfiling Index (DTF) Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 115 PAYING TAXES What are the changes over time? Economies around the world have made paying taxes concrete results. Some economies simplifying faster and easier for businesses—such as by compliance with tax obligations and reducing rates have consolidating filings, reducing the frequency of seen tax revenue rise. What tax reforms has Doing payments or offering electronic filing and payment. Business recorded in East African Community (EAC) (table Many have lowered tax rates. Changes have brought 8.1)? Table 8.1 How have economies in East African Community (EAC) made paying taxes easier—or not? By Doing Business report year DB2011 to DB2017 DB year Economy Reform Kenya streamlined the process of getting electricity by introducing the use of a geographic information system DB2017 Kenya which eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain an electricity connection. Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party DB2017 Kenya transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company. Kenya made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the DB2017 Kenya debtor’s business during insolvency proceedings and by introducing regulations for insolvency practitioners. Kenya made Registering property easier by increasing the DB2017 Kenya transparency at its land registry and cadastre. Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, memorandum and articles of association . Kenya also eliminated requirements to DB2017 Kenya sign compliance declarations before a commissioner of oaths. However, Kenya also made starting a business more expensive by introducing a flat fee for company incorporation. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 116 DB year Economy Reform Rwanda made dealing with construction permits more cumbersome and expensive by introducing new requirements DB2017 Rwanda to obtain a building permit. It also strengthen the quality control index by implementing the qualifications required for architects and engineers. Rwanda made enforcing contracts easier by introducing an DB2017 Rwanda electronic case management system for judges and lawyers. The credit bureau in Tanzania expanded credit bureau DB2017 Tanzania borrower coverage and began to distribute credit data from retailers. Rwanda made it easier to register property by introducing DB2017 Rwanda effective time limits and increasing the transparency of the land administration system. Uganda made starting a business easier by eliminating the DB2017 Uganda requirement that a commissioner of oaths must sign compliance declarations. Rwanda made starting a business easier by improving the DB2017 Rwanda online registration one-stop shop and streamlining post- registration procedures. Rwanda made trading across borders easier by removing the DB2017 Rwanda mandatory pre-shipment inspection for imported products. Uganda made trading across borders easier by constructing DB2017 Uganda the Malaba One-Stop Border Post which reduced border compliance time for exports. Uganda made paying taxes easier by eliminating a requirement for tax returns to be submitted in paper copy DB2017 Uganda following online submission. At the same time, Uganda increased the stamp duty for insurance contracts. Tanzania made paying taxes more complicated by increasing the frequency of filing of the skills Development Levy and DB2017 Tanzania more costly by introducing a workers’ compensation tariff paid by employers. DB2017 Rwanda Rwanda made paying taxes more complicated by introducing Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 117 DB year Economy Reform a requirement that companies file and pay social security contributions monthly instead of quarterly. Burundi made paying taxes easier by introducing a new tax DB2017 Burundi return and eliminating the personalized VAT declaration form. In Uganda the credit bureau expanded borrower coverage, DB2016 Uganda improving access to credit information. In Rwanda the credit bureau started to provide credit scores to banks and other financial institutions while the credit DB2016 Rwanda registry expanded borrower coverage, strengthening the credit reporting system. The utility in Kenya reduced delays for new connections by DB2016 Kenya enforcing service delivery timelines and hiring contractors for meter installation. Kenya made dealing with construction permits more difficult by requiring an additional approval before issuance of the DB2016 Kenya building permit and by increasing the costs for both water and sewerage connections Kenya made property transfers faster by improving electronic DB2016 Kenya document management at the land registry and introducing a unified form for registration. Kenya made starting a business easier by reducing the time it DB2016 Kenya takes to assess and pay stamp duty. Kenya improved access to credit information by passing DB2016 Kenya legislation that allows the sharing of positive information and by expanding borrower coverage. The utility in Uganda reduced delays for new electricity connections by deploying more customer service engineers DB2016 Uganda and reducing the time needed for the inspection and meter installation. Rwanda made dealing with construction permits easier by DB2016 Rwanda adopting a new building code and new urban planning regulations. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 118 DB year Economy Reform Rwanda improved its insolvency system by introducing provisions on voidable transactions and the approval of DB2016 Rwanda reorganization plans and by establishing additional safeguards for creditors in reorganization proceedings. Rwanda made paying taxes easier for companies by DB2016 Rwanda introducing electronic filing and making its use compulsory. Rwanda strengthened minority investor protections by introducing provisions allowing holders of 10% of a company’s shares to call for an extraordinary meeting of shareholders, requiring holders of special classes of shares to DB2016 Rwanda vote on decisions affecting their shares, requiring board members to disclose information about their directorships and primary employment and requiring that audit reports for listed companies be published in a newspaper. Rwanda made starting a business easier by eliminating the DB2016 Rwanda need for new companies to open a bank account in order to register for VAT. Uganda made starting a business easier by introducing an DB2016 Uganda online system for obtaining a trading license and by reducing business incorporation fees. Rwanda increased the time and cost for documentary and DB2016 Rwanda border compliance for importing by making preshipment inspection mandatory for all imported products. Tanzania reduced the time for both exporting and importing by implementing the Tanzania Customs Integrated System DB2016 Tanzania (TANCIS), an online system for downloading and processing customs documents. In Rwanda the electricity company made getting electricity DB2015 Rwanda less costly by eliminating several fees. Rwanda made dealing with construction permits easier by DB2015 Rwanda eliminating the fee for obtaining a freehold title and by streamlining the process for obtaining an occupancy permit. DB2015 Uganda Uganda made resolving insolvency easier by consolidating all provisions related to corporate insolvency in one law, Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 119 DB year Economy Reform establishing provisions on the administration of companies (reorganization), clarifying standards on the professional qualifications of insolvency practitioners and introducing provisions allowing the avoidance of undervalued transactions. Tanzania made paying taxes more complicated for companies by introducing an excise tax on money transfers. On the other DB2015 Tanzania hand, it made paying taxes less costly by reducing the rate of the skill and development levy. Tanzania made starting a business more difficult by DB2015 Tanzania increasing registration fees. Rwanda made starting a business more difficult by requiring DB2015 Rwanda companies to buy an electronic billing machine from a certified supplier. Tanzania made trading across borders easier by upgrading DB2015 Tanzania infrastructure at the port of Dar es Salaam. Uganda made trading across borders easier by implementing DB2015 Uganda the ASYCUDA World electronic system for the submission of export and import documents. Kenya made dealing with construction permits more costly by DB2015 Kenya increasing the building permit fees. Kenya made paying taxes more costly for companies by DB2015 Kenya increasing employers’ social security contribution rate. Kenya improved its credit information system by passing legislation that allows the sharing of both positive and DB2015 Kenya negative credit information and establishes guidelines for the treatment of historical data. Rwanda improved access to credit by establishing clear priority rules outside bankruptcy for secured creditors and DB2015 Rwanda establishing clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures. DB2015 Tanzania Tanzania improved access to credit information by creating Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 120 DB year Economy Reform credit bureaus. Burundi made getting electricity easier by eliminating the electricity utility’s monopoly on the sale of materials needed DB2014 Burundi for new connections and by dropping the processing fee for new connections. Burundi made dealing with construction permits easier by DB2014 Burundi establishing a one-stop shop for obtaining building permits and utility connections. Burundi made paying taxes less costly for companies by DB2014 Burundi reducing corporate income tax rate. Burundi made transferring property easier by creating a one- DB2014 Burundi stop shop for property registration. Burundi made starting a business easier by allowing registration with the Ministry of Labor at the one-stop shop DB2014 Burundi and by speeding up the process of obtaining the registration certificate. Burundi made trading across borders easier by eliminating DB2014 Burundi the requirement for a preshipment inspection clean report of findings. Rwanda made dealing with construction permits easier and less costly by reducing the building permit fees, DB2014 Rwanda implementing an electronic platform for building permit applications and streamlining procedures. Tanzania made resolving insolvency easier through new rules clearly specifying the professional requirements and DB2014 Tanzania remuneration for insolvency practitioners, promoting reorganization proceedings and streamlining insolvency proceedings. Rwanda made resolving insolvency easier through a new law clarifying the standards for beginning insolvency proceedings; preventing the separation of the debtor’s assets during DB2014 Rwanda reorganization proceedings; setting clear time limits for the submission of a reorganization plan; and implementing an automatic stay of creditors’ enforcement actions. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 121 DB year Economy Reform Rwanda made paying taxes easier and less costly for companies by rolling out its electronic filing system to the DB2014 Rwanda majority of businesses and by reducing the property tax rate and business trading license fee. Rwanda strengthened investor protections through a new law DB2014 Rwanda allowing plaintiffs to cross-examine defendants and witnesses with prior approval of the questions by the court. Rwanda made transferring property easier by eliminating the requirement to obtain a tax clearance certificate and by DB2014 Rwanda implementing the web-based Land Administration Information System for processing land transactions. Uganda made transferring property easier by eliminating the DB2014 Uganda need to have instruments of land transfer physically embossed to certify payment of the stamp duty. Rwanda made starting a business easier by reducing the time DB2014 Rwanda required to obtain a registration certificate. Rwanda made trading across borders easier by introducing an DB2014 Rwanda electronic single-window system at the border. Tanzania improved its credit information system through new regulations that provide for the licensing of credit reference DB2014 Tanzania bureaus and outline the functions of the credit reference data bank. Rwanda strengthened its secured transactions system by providing more flexibility on the types of debts and DB2014 Rwanda obligations that can be secured through a collateral agreement. Burundi made starting a business easier by eliminating the requirements to have company documents notarized, to DB2013 Burundi publish information on new companies in a journal and to register new companies with the Ministry of Trade and Industry. Kenya made paying taxes faster for companies by enhancing DB2013 Kenya electronic filing systems. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 122 DB year Economy Reform Tanzania made starting a business easier by eliminating the DB2013 Tanzania requirement for inspections by health, town and land officers as a prerequisite for a business license. Tanzania made dealing with construction permits more DB2013 Tanzania expensive by increasing the cost to obtain a building permit. Uganda made transferring property more difficult by introducing a requirement for property purchasers to obtain an income tax certificate before registration, resulting in delays at the Uganda Revenue Authority and the Ministry of DB2013 Uganda Finance. At the same time, Uganda made it easier by digitizing records at the title registry, increasing efficiency at the assessor’s office and making it possible for more banks to accept the stamp duty payment. Rwanda made enforcing contracts easier by implementing an DB2013 Rwanda electronic filing system for initial complaints. Uganda strengthened its insolvency process by clarifying rules on the creation of mortgages, establishing the duties of DB2013 Uganda mortgagors and mortgagees, defining priority rules, providing remedies for mortgagors and mortgagees and establishing the powers of receivers. Rwanda made getting electricity easier by reducing the cost DB2013 Rwanda of obtaining a new connection. Burundi reduced the time to trade across borders by enhancing its use of electronic data interchange systems, DB2013 Burundi introducing a more efficient system for monitoring goods going through transit countries and improving border coordination with neighboring transit countries. Tanzania made importing more difficult by introducing a DB2013 Tanzania requirement to obtain a certificate of conformity before the imported goods are shipped. Burundi made obtaining a construction permit easier by DB2013 Burundi eliminating the requirement for a clearance from the Ministry of Health and reducing the cost of the geotechnical study. DB2013 Burundi Burundi made property transfers faster by establishing a Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 123 DB year Economy Reform statutory time limit for processing property transfer requests at the land registry. Burundi strengthened investor protections by introducing new requirements for the approval of transactions between interested parties, by requiring greater corporate disclosure DB2012 Burundi to the board of directors and in the annual report and by making it easier to sue directors in cases of prejudicial transactions between interested parties. Kenya introduced a case management system that will help DB2012 Kenya increase the efficiency and cost-effectiveness of commercial dispute resolution. Tanzania made trading across borders faster by implementing DB2012 Tanzania the Pre-Arrival Declaration (PAD) system and electronic submission of customs declaration. Burundi amended its commercial code to establish DB2012 Burundi foreclosure procedures. Burundi made paying taxes easier for companies by reducing DB2012 Burundi the payment frequency for social security contributions from monthly to quarterly. In Rwanda the private credit bureau started to collect and distribute information from utility companies and also started DB2012 Rwanda to distribute more than 2 years of historical information, improving the credit information system. Rwanda reduced the frequency of value added tax filings by DB2012 Rwanda companies from monthly to quarterly. Rwanda made transferring property more expensive by DB2012 Rwanda enforcing the checking of the capital gains tax. Uganda increased the efficiency of property transfers by DB2012 Uganda establishing performance standards and recruiting more officials at the land office. Uganda introduced changes that added time to the process DB2012 Uganda of obtaining a business license, slowing business start-up. But it simplified registration for a tax identification number and Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 124 DB year Economy Reform for value added tax by introducing an online system. Rwanda made starting a business easier by reducing the DB2012 Rwanda business registration fees. Burundi made dealing with construction permits easier by DB2012 Burundi reducing the cost to obtain a geotechnical study. Uganda made it more difficult to start a business by DB2011 Uganda increasing the trade licensing fees. Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue DB2011 Kenya Authority’s electronic data interchange system for customs clearance. Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and DB2011 Rwanda implementing new time limits for the issuance of various permits. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with DB2011 Rwanda Uganda and other neighbors, leading to an improvement in the trade logistics environment. Uganda enhanced access to credit by establishing a new DB2011 Uganda private credit bureau. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that DB2011 Rwanda loans of all sizes be reported to the central bank’s public credit registry. Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, DB2011 Kenya merging the tax and value added tax registration procedures and digitizing records at the registrar. Kenya increased the administrative burden of paying taxes by DB2011 Kenya requiring quarterly filing of payroll taxes. DB2011 Uganda Uganda continues to improve the efficiency of its court Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 125 DB year Economy Reform system, greatly reducing the time to file and serve a claim. Burundi made paying taxes simpler by replacing the DB2011 Burundi transactions tax with a value added tax. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 126 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE FOR IMPORT & EXPORT business. Excessive document requirements, burdensome customs procedures, inefficient port Documentary compliance – cost (US$) & time operations and inadequate infrastructure all lead to (hours) extra costs and delays for exporters and importers, stifling trade potential. Obtain, prepare and submit documents: What do the indicators cover? -During transport, clearance, inspections and port or border handling in origin economy Doing Business records the time and cost associated with the logistical process of exporting and -Required by origin, transit and destination economies importing goods. Under the new methodology introduced this year, Doing Business measures the Covers all documents by law and in practice time and cost (excluding tariffs) associated with three Border compliance – cost (US$) & time sets of procedures—documentary compliance, (hours) border compliance and domestic transport—within the overall process of exporting or importing a Customs clearance and inspections shipment of goods. The ranking of economies on the Inspections by other agencies ease of trading across borders is determined by Port or border handling sorting their distance to frontier scores for trading across borders. These scores are the simple average Obtaining, preparing and submitting of the distance to frontier scores for the time and documents during clearance, inspections and port or border handling cost for documentary compliance and border compliance to export and import. Domestic transport* Loading and unloading of shipment To make the data comparable across economies, a few assumptions are made about the traded goods Transport between warehouse and terminal/port and the transactions: Transport between terminal/port and border Time Obtaining, preparing and submitting  Time is measured in hours, and 1 day is 24 hours documents during domestic transport (for example, 22 days are recorded as 22 × 24 = Traffic delays and road police checks while 528 hours). If customs clearance takes 7.5 hours, shipment is en route the data are recorded as is. Alternatively, suppose that documents are submitted to a * Although Doing Business collects and publishes data on customs agency at 8:00 a.m., are processed the time and cost for domestic transport, it does not use overnight and can be picked up at 8:00 a.m. the these data in calculating the distance to frontier score for next day. In this case the time for customs trading across borders or the ranking on the ease of trading clearance would be recorded as 24 hours across borders. because the actual procedure took 24 hours. Cost   Insurance cost and informal payments for which no  receipt is issued are excluded from the costs recorded. Costs are reported in U.S. dollars.  Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 127 Assumptions of the case study  For each of the 190 economies covered by Doing  Shipping cost based on weight is assumed to be Business, it is assumed that a shipment travels greater than shipping cost based on volume. from a warehouse in the largest business city of  If government fees are determined by the value of the exporting economy to a warehouse in the the shipment, the value is assumed to be $50,000. largest business city of the importing economy. For 11 economies the data are also collected,  The product is new, not secondhand or used under the same case study assumptions, for the merchandise. second largest business city.  The exporting firm is responsible for hiring and  The import and export case studies assume paying for a freight forwarder or customs broker (or different traded products. It is assumed that each both) and pays for all costs related to international economy imports a standardized shipment of 15 shipping, domestic transport, clearance and metric tons of containerized auto parts (HS 8708) mandatory inspections by customs and other from its natural import partner—the economy government agencies, port or border handling, from which it imports the largest value (price documentary compliance fees and the like for times quantity) of auto parts. It is assumed that exports. The importing firm is responsible for the each economy exports the product of its above costs for imports. comparative advantage (defined by the largest  The mode of transport is the one most widely used export value) to its natural export partner—the for the chosen export or import product and the economy that is the largest purchaser of this trading partner, as is the seaport, airport or land product. Precious metal and gems, live animals border crossing. and pharmaceuticals are excluded from the list of possible export products, however, and the  All electronic submissions of information requested second largest product category is considered as by any government agency in connection with the needed. shipment are considered to be documents obtained, prepared and submitted during the  A shipment is a unit of trade. Export shipments do export or import process. not necessarily need to be containerized, while import shipments of auto parts are assumed to be  A port or border is defined as a place (seaport, containerized. airport or land border crossing) where merchandise can enter or leave an economy.  Government agencies considered relevant are agencies such as customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 128 TRADING ACROSS BORDERS Where do the region’s economies stand today? How easy it is for businesses in economies in East African trading across borders suggest an answer (figure 9.1). Community (EAC) to export and import goods? The The average ranking of the region and comparator global rankings of these economies on the ease of regions provide a useful benchmark. Figure 9.1 How economies in East African Community (EAC) rank on the ease of trading across borders Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 129 TRADING ACROSS BORDERS The indicators reported here are for trading a shipment and import is collected from local freight forwarders, of goods by the most widely used mode of transport customs brokers and traders. Comparing these indicators (whether sea, land, air or some combination of these). across the region and with averages both for the region The information on the time and cost to complete export and for comparator regions can provide useful insights. Figure 9.2 What it takes to trade across borders in economies in East African Community (EAC) Time to export: Border compliance (hours) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 130 TRADING ACROSS BORDERS Cost to export: Border compliance (USD) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 131 TRADING ACROSS BORDERS Time to export: Documentary compliance (hours) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 132 TRADING ACROSS BORDERS Cost to export: Documentary compliance (USD) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 133 TRADING ACROSS BORDERS Time to import: Border compliance (hours) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 134 TRADING ACROSS BORDERS Cost to import: Border compliance (USD) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 135 TRADING ACROSS BORDERS Time to import: Documentary compliance (hours) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 136 TRADING ACROSS BORDERS Cost to import: Documentary compliance (USD) Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 137 TRADING ACROSS BORDERS What are the changes over time? In economies around the world, trading across borders systems. These changes help improve their trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing Business tools to facilitate trade—including single windows, risk- recorded in East African Community (EAC) (table 9.1)? based inspections and electronic data interchange Table 9.1 How have economies in East African Community (EAC) made trading across borders easier—or not? By Doing Business report year DB2011 to DB2017 DB year Economy Reform Kenya streamlined the process of getting electricity by introducing the use of a geographic information system DB2017 Kenya which eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain an electricity connection. Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party DB2017 Kenya transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company. Kenya made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the DB2017 Kenya debtor’s business during insolvency proceedings and by introducing regulations for insolvency practitioners. Kenya made Registering property easier by increasing the DB2017 Kenya transparency at its land registry and cadastre. Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, memorandum and articles of association . Kenya also eliminated requirements to DB2017 Kenya sign compliance declarations before a commissioner of oaths. However, Kenya also made starting a business more expensive by introducing a flat fee for company incorporation. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 138 DB year Economy Reform Rwanda made dealing with construction permits more cumbersome and expensive by introducing new requirements DB2017 Rwanda to obtain a building permit. It also strengthen the quality control index by implementing the qualifications required for architects and engineers. Rwanda made enforcing contracts easier by introducing an DB2017 Rwanda electronic case management system for judges and lawyers. The credit bureau in Tanzania expanded credit bureau DB2017 Tanzania borrower coverage and began to distribute credit data from retailers. Rwanda made it easier to register property by introducing DB2017 Rwanda effective time limits and increasing the transparency of the land administration system. Uganda made starting a business easier by eliminating the DB2017 Uganda requirement that a commissioner of oaths must sign compliance declarations. Rwanda made starting a business easier by improving the DB2017 Rwanda online registration one-stop shop and streamlining post- registration procedures. Rwanda made trading across borders easier by removing the DB2017 Rwanda mandatory pre-shipment inspection for imported products. Uganda made trading across borders easier by constructing DB2017 Uganda the Malaba One-Stop Border Post which reduced border compliance time for exports. Uganda made paying taxes easier by eliminating a requirement for tax returns to be submitted in paper copy DB2017 Uganda following online submission. At the same time, Uganda increased the stamp duty for insurance contracts. Tanzania made paying taxes more complicated by increasing the frequency of filing of the skills Development Levy and DB2017 Tanzania more costly by introducing a workers’ compensation tariff paid by employers. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 139 DB year Economy Reform Rwanda made paying taxes more complicated by introducing DB2017 Rwanda a requirement that companies file and pay social security contributions monthly instead of quarterly. Burundi made paying taxes easier by introducing a new tax DB2017 Burundi return and eliminating the personalized VAT declaration form. In Uganda the credit bureau expanded borrower coverage, DB2016 Uganda improving access to credit information. In Rwanda the credit bureau started to provide credit scores to banks and other financial institutions while the credit DB2016 Rwanda registry expanded borrower coverage, strengthening the credit reporting system. The utility in Kenya reduced delays for new connections by DB2016 Kenya enforcing service delivery timelines and hiring contractors for meter installation. Kenya made dealing with construction permits more difficult by requiring an additional approval before issuance of the DB2016 Kenya building permit and by increasing the costs for both water and sewerage connections Kenya made property transfers faster by improving electronic DB2016 Kenya document management at the land registry and introducing a unified form for registration. Kenya made starting a business easier by reducing the time it DB2016 Kenya takes to assess and pay stamp duty. Kenya improved access to credit information by passing DB2016 Kenya legislation that allows the sharing of positive information and by expanding borrower coverage. The utility in Uganda reduced delays for new electricity connections by deploying more customer service engineers DB2016 Uganda and reducing the time needed for the inspection and meter installation. DB2016 Rwanda Rwanda made dealing with construction permits easier by adopting a new building code and new urban planning Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 140 DB year Economy Reform regulations. Rwanda improved its insolvency system by introducing provisions on voidable transactions and the approval of DB2016 Rwanda reorganization plans and by establishing additional safeguards for creditors in reorganization proceedings. Rwanda made paying taxes easier for companies by DB2016 Rwanda introducing electronic filing and making its use compulsory. Rwanda strengthened minority investor protections by introducing provisions allowing holders of 10% of a company’s shares to call for an extraordinary meeting of shareholders, requiring holders of special classes of shares to DB2016 Rwanda vote on decisions affecting their shares, requiring board members to disclose information about their directorships and primary employment and requiring that audit reports for listed companies be published in a newspaper. Rwanda made starting a business easier by eliminating the DB2016 Rwanda need for new companies to open a bank account in order to register for VAT. Uganda made starting a business easier by introducing an DB2016 Uganda online system for obtaining a trading license and by reducing business incorporation fees. Rwanda increased the time and cost for documentary and DB2016 Rwanda border compliance for importing by making preshipment inspection mandatory for all imported products. Tanzania reduced the time for both exporting and importing by implementing the Tanzania Customs Integrated System DB2016 Tanzania (TANCIS), an online system for downloading and processing customs documents. In Rwanda the electricity company made getting electricity DB2015 Rwanda less costly by eliminating several fees. DB2015 Rwanda Rwanda made dealing with construction permits easier by eliminating the fee for obtaining a freehold title and by Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 141 DB year Economy Reform streamlining the process for obtaining an occupancy permit. Uganda made resolving insolvency easier by consolidating all provisions related to corporate insolvency in one law, establishing provisions on the administration of companies DB2015 Uganda (reorganization), clarifying standards on the professional qualifications of insolvency practitioners and introducing provisions allowing the avoidance of undervalued transactions. Tanzania made paying taxes more complicated for companies by introducing an excise tax on money transfers. On the other DB2015 Tanzania hand, it made paying taxes less costly by reducing the rate of the skill and development levy. Tanzania made starting a business more difficult by DB2015 Tanzania increasing registration fees. Rwanda made starting a business more difficult by requiring DB2015 Rwanda companies to buy an electronic billing machine from a certified supplier. Tanzania made trading across borders easier by upgrading DB2015 Tanzania infrastructure at the port of Dar es Salaam. Uganda made trading across borders easier by implementing DB2015 Uganda the ASYCUDA World electronic system for the submission of export and import documents. Kenya made dealing with construction permits more costly by DB2015 Kenya increasing the building permit fees. Kenya made paying taxes more costly for companies by DB2015 Kenya increasing employers’ social security contribution rate. Kenya improved its credit information system by passing legislation that allows the sharing of both positive and DB2015 Kenya negative credit information and establishes guidelines for the treatment of historical data. DB2015 Rwanda Rwanda improved access to credit by establishing clear priority rules outside bankruptcy for secured creditors and Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 142 DB year Economy Reform establishing clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures. Tanzania improved access to credit information by creating DB2015 Tanzania credit bureaus. Burundi made getting electricity easier by eliminating the electricity utility’s monopoly on the sale of materials needed DB2014 Burundi for new connections and by dropping the processing fee for new connections. Burundi made dealing with construction permits easier by DB2014 Burundi establishing a one-stop shop for obtaining building permits and utility connections. Burundi made paying taxes less costly for companies by DB2014 Burundi reducing corporate income tax rate. Burundi made transferring property easier by creating a one- DB2014 Burundi stop shop for property registration. Burundi made starting a business easier by allowing registration with the Ministry of Labor at the one-stop shop DB2014 Burundi and by speeding up the process of obtaining the registration certificate. Burundi made trading across borders easier by eliminating DB2014 Burundi the requirement for a preshipment inspection clean report of findings. Rwanda made dealing with construction permits easier and less costly by reducing the building permit fees, DB2014 Rwanda implementing an electronic platform for building permit applications and streamlining procedures. Tanzania made resolving insolvency easier through new rules clearly specifying the professional requirements and DB2014 Tanzania remuneration for insolvency practitioners, promoting reorganization proceedings and streamlining insolvency proceedings. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 143 DB year Economy Reform Rwanda made resolving insolvency easier through a new law clarifying the standards for beginning insolvency proceedings; preventing the separation of the debtor’s assets during DB2014 Rwanda reorganization proceedings; setting clear time limits for the submission of a reorganization plan; and implementing an automatic stay of creditors’ enforcement actions. Rwanda made paying taxes easier and less costly for companies by rolling out its electronic filing system to the DB2014 Rwanda majority of businesses and by reducing the property tax rate and business trading license fee. Rwanda strengthened investor protections through a new law DB2014 Rwanda allowing plaintiffs to cross-examine defendants and witnesses with prior approval of the questions by the court. Rwanda made transferring property easier by eliminating the requirement to obtain a tax clearance certificate and by DB2014 Rwanda implementing the web-based Land Administration Information System for processing land transactions. Uganda made transferring property easier by eliminating the DB2014 Uganda need to have instruments of land transfer physically embossed to certify payment of the stamp duty. Rwanda made starting a business easier by reducing the time DB2014 Rwanda required to obtain a registration certificate. Rwanda made trading across borders easier by introducing an DB2014 Rwanda electronic single-window system at the border. Tanzania improved its credit information system through new regulations that provide for the licensing of credit reference DB2014 Tanzania bureaus and outline the functions of the credit reference data bank. Rwanda strengthened its secured transactions system by providing more flexibility on the types of debts and DB2014 Rwanda obligations that can be secured through a collateral agreement. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 144 DB year Economy Reform Burundi made starting a business easier by eliminating the requirements to have company documents notarized, to DB2013 Burundi publish information on new companies in a journal and to register new companies with the Ministry of Trade and Industry. Kenya made paying taxes faster for companies by enhancing DB2013 Kenya electronic filing systems. Tanzania made starting a business easier by eliminating the DB2013 Tanzania requirement for inspections by health, town and land officers as a prerequisite for a business license. Tanzania made dealing with construction permits more DB2013 Tanzania expensive by increasing the cost to obtain a building permit. Uganda made transferring property more difficult by introducing a requirement for property purchasers to obtain an income tax certificate before registration, resulting in delays at the Uganda Revenue Authority and the Ministry of DB2013 Uganda Finance. At the same time, Uganda made it easier by digitizing records at the title registry, increasing efficiency at the assessor’s office and making it possible for more b anks to accept the stamp duty payment. Rwanda made enforcing contracts easier by implementing an DB2013 Rwanda electronic filing system for initial complaints. Uganda strengthened its insolvency process by clarifying rules on the creation of mortgages, establishing the duties of DB2013 Uganda mortgagors and mortgagees, defining priority rules, providing remedies for mortgagors and mortgagees and establishing the powers of receivers. Rwanda made getting electricity easier by reducing the cost DB2013 Rwanda of obtaining a new connection. Burundi reduced the time to trade across borders by DB2013 Burundi enhancing its use of electronic data interchange systems, introducing a more efficient system for monitoring goods going through transit countries and improving border Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 145 DB year Economy Reform coordination with neighboring transit countries. Tanzania made importing more difficult by introducing a DB2013 Tanzania requirement to obtain a certificate of conformity before the imported goods are shipped. Burundi made obtaining a construction permit easier by DB2013 Burundi eliminating the requirement for a clearance from the Ministry of Health and reducing the cost of the geotechnical study. Burundi made property transfers faster by establishing a DB2013 Burundi statutory time limit for processing property transfer requests at the land registry. Burundi strengthened investor protections by introducing new requirements for the approval of transactions between interested parties, by requiring greater corporate disclosure DB2012 Burundi to the board of directors and in the annual report and by making it easier to sue directors in cases of prejudicial transactions between interested parties. Kenya introduced a case management system that will help DB2012 Kenya increase the efficiency and cost-effectiveness of commercial dispute resolution. Tanzania made trading across borders faster by implementing DB2012 Tanzania the Pre-Arrival Declaration (PAD) system and electronic submission of customs declaration. Burundi amended its commercial code to establish DB2012 Burundi foreclosure procedures. Burundi made paying taxes easier for companies by reducing DB2012 Burundi the payment frequency for social security contributions from monthly to quarterly. In Rwanda the private credit bureau started to collect and distribute information from utility companies and also started DB2012 Rwanda to distribute more than 2 years of historical information, improving the credit information system. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 146 DB year Economy Reform Rwanda reduced the frequency of value added tax filings by DB2012 Rwanda companies from monthly to quarterly. Rwanda made transferring property more expensive by DB2012 Rwanda enforcing the checking of the capital gains tax. Uganda increased the efficiency of property transfers by DB2012 Uganda establishing performance standards and recruiting more officials at the land office. Uganda introduced changes that added time to the process of obtaining a business license, slowing business start-up. But DB2012 Uganda it simplified registration for a tax identification number and for value added tax by introducing an online system. Rwanda made starting a business easier by reducing the DB2012 Rwanda business registration fees. Burundi made dealing with construction permits easier by DB2012 Burundi reducing the cost to obtain a geotechnical study. Uganda made it more difficult to start a business by DB2011 Uganda increasing the trade licensing fees. Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue DB2011 Kenya Authority’s electronic data interchange system for customs clearance. Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and DB2011 Rwanda implementing new time limits for the issuance of various permits. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with DB2011 Rwanda Uganda and other neighbors, leading to an improvement in the trade logistics environment. Uganda enhanced access to credit by establishing a new DB2011 Uganda private credit bureau. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 147 DB year Economy Reform Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that DB2011 Rwanda loans of all sizes be reported to the central bank’s public credit registry. Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, DB2011 Kenya merging the tax and value added tax registration procedures and digitizing records at the registrar. Kenya increased the administrative burden of paying taxes by DB2011 Kenya requiring quarterly filing of payroll taxes. Uganda continues to improve the efficiency of its court DB2011 Uganda system, greatly reducing the time to file and serve a claim. Burundi made paying taxes simpler by replacing the DB2011 Burundi transactions tax with a value added tax. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 148 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Time required to enforce a contract through courts encourage new business relationships because the courts (calendar days) businesses know they can rely on the courts if a new customer fails to pay. Speedy trials are essential for Time to file and serve the case small enterprises, which may lack the resources to Time for trial and to obtain the judgment stay in business while awaiting the outcome of a long court dispute. Time to enforce the judgment What do the indicators cover? Cost required to enforce a contract through the courts (% of claim) Doing Business measures the time and cost for resolving a standardized commercial dispute through Attorney fees a local first-instance court. In addition, this year it Court fees introduces a new measure, the quality of judicial Enforcement fees processes index, evaluating whether each economy has adopted a series of good practices that promote Quality of judicial processes index (0-18) quality and efficiency in the court system. This new Court structure and proceedings (0-5) index replaces the indicator on procedures, which was eliminated this year. The ranking of economies Case management (0-6) on the ease of enforcing contracts is determined by Court automation (0-4) sorting their distance to frontier scores. These scores Alternative dispute resolution (0-3) are the simple average of the distance to frontier scores for each of the component indicators The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The value of the claim is equal to 200% of the economy’s income per capita or $5,000, whichever is greater.  The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.  Seller (the plaintiff) sues Buyer (the defendant) to recover the amount under the sales agreement. The dispute is brought before the court located in the economy’s largest business city with jurisdiction over commercial cases worth 200% Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 149 of income per capita or $5,000, whichever is greater. As noted, for 11 economies the data are also collected for the second largest business city.  At the outset of the dispute, Seller decides to attach Buyer’s movable assets (for example, office equipment and vehicles) because Seller fears that Buyer may hide its assets or otherwise become insolvent.  The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods was not adequate. Because the court cannot decide the case on the basis of documentary evidence or legal title alone, an expert opinion is given on the quality of the goods. If it is standard practice in the economy for each party to call its own expert witness, the parties each call one expert witness. If it is standard practice for the judge to appoint an independent expert, the judge does so. In this case the judge does not allow opposing expert testimony  Following the expert opinion, the judge decides that the goods delivered by Seller were of adequate quality and that Buyer must pay the contract price. The judge thus renders a final judgment that is 100% in favor of Seller.  Buyer does not appeal the judgment. Seller decides to start enforcing the judgment as soon as the time allocated by law for appeal lapses.  Seller takes all required steps for prompt enforcement of the judgment. The money is successfully collected through a public sale of Buyer’s movable assets (for example, office equipment and vehicles). Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 150 ENFORCING CONTRACTS Where do the region’s economies stand today? How efficient is the process of resolving a commercial economies on the ease of enforcing contracts suggest an dispute through the courts in economies in East African answer (figure 10.1). The average ranking of the region Community (EAC)? The global rankings of these and comparator regions provide a useful benchmark. Figure 10.1 How economies in East African Community (EAC) rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 151 ENFORCING CONTRACTS The indicators underlying the rankings may also be judicial processes index (figure 10.2). Comparing these revealing. Data collected by Doing Business show what it indicators across the region and with averages both for takes to enforce a contract through the courts in each the region and for comparator regions can provide economy in the region: the time, the cost and quality of useful insights. Figure 10.2 What it takes to enforce a contract through the courts in economies in East African Community (EAC) Time (days) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 152 ENFORCING CONTRACTS Cost (% of claim) Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 153 ENFORCING CONTRACTS Quality of Judicial Processes Index (0-18) Source: Doing Business database. Note: Higher values indicate more efficient judicial processes. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 154 ENFORCING CONTRACTS What are the changes over time? Economies in all regions have improved contract reducing backlogs by introducing periodic reviews to enforcement in recent years. A judiciary can be improved clear inactive cases from the docket and by making in different ways. Higher-income economies tend to look procedures faster. What reforms making it easier (or for ways to enhance efficiency by introducing new more difficult) to enforce contracts has Doing Business technology. Lower-income economies often work on recorded in East African Community (EAC) (table 10.1)? Table 10.1 How have economies in East African Community (EAC) made enforcing contracts easier—or not? By Doing Business report year DB2011 to DB2017 DB year Economy Reform Kenya streamlined the process of getting electricity by introducing the use of a geographic information system DB2017 Kenya which eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain an electricity connection. Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party DB2017 Kenya transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company. Kenya made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the DB2017 Kenya debtor’s business during insolvency proceedings and by introducing regulations for insolvency practitioners. Kenya made Registering property easier by increasing the DB2017 Kenya transparency at its land registry and cadastre. Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, memorandum and articles of association . Kenya also eliminated requirements to DB2017 Kenya sign compliance declarations before a commissioner of oaths. However, Kenya also made starting a business more expensive by introducing a flat fee for company incorporation. Rwanda made dealing with construction permits more cumbersome and expensive by introducing new requirements DB2017 Rwanda to obtain a building permit. It also strengthen the quality control index by implementing the qualifications required for Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 155 DB year Economy Reform architects and engineers. Rwanda made enforcing contracts easier by introducing an DB2017 Rwanda electronic case management system for judges and lawyers. The credit bureau in Tanzania expanded credit bureau DB2017 Tanzania borrower coverage and began to distribute credit data from retailers. Rwanda made it easier to register property by introducing DB2017 Rwanda effective time limits and increasing the transparency of the land administration system. Uganda made starting a business easier by eliminating the DB2017 Uganda requirement that a commissioner of oaths must sign compliance declarations. Rwanda made starting a business easier by improving the DB2017 Rwanda online registration one-stop shop and streamlining post- registration procedures. Rwanda made trading across borders easier by removing the DB2017 Rwanda mandatory pre-shipment inspection for imported products. Uganda made trading across borders easier by constructing DB2017 Uganda the Malaba One-Stop Border Post which reduced border compliance time for exports. Uganda made paying taxes easier by eliminating a requirement for tax returns to be submitted in paper copy DB2017 Uganda following online submission. At the same time, Uganda increased the stamp duty for insurance contracts. Tanzania made paying taxes more complicated by increasing the frequency of filing of the skills Development Levy and DB2017 Tanzania more costly by introducing a workers’ compensation tariff paid by employers. Rwanda made paying taxes more complicated by introducing DB2017 Rwanda a requirement that companies file and pay social security contributions monthly instead of quarterly. Burundi made paying taxes easier by introducing a new tax DB2017 Burundi return and eliminating the personalized VAT declaration form. In Uganda the credit bureau expanded borrower coverage, DB2016 Uganda improving access to credit information. In Rwanda the credit bureau started to provide credit scores to banks and other financial institutions while the credit DB2016 Rwanda registry expanded borrower coverage, strengthening the credit reporting system. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 156 DB year Economy Reform The utility in Kenya reduced delays for new connections by DB2016 Kenya enforcing service delivery timelines and hiring contractors for meter installation. Kenya made dealing with construction permits more difficult by requiring an additional approval before issuance of the DB2016 Kenya building permit and by increasing the costs for both water and sewerage connections Kenya made property transfers faster by improving electronic DB2016 Kenya document management at the land registry and introducing a unified form for registration. Kenya made starting a business easier by reducing the time it DB2016 Kenya takes to assess and pay stamp duty. Kenya improved access to credit information by passing DB2016 Kenya legislation that allows the sharing of positive information and by expanding borrower coverage. The utility in Uganda reduced delays for new electricity connections by deploying more customer service engineers DB2016 Uganda and reducing the time needed for the inspection and meter installation. Rwanda made dealing with construction permits easier by DB2016 Rwanda adopting a new building code and new urban planning regulations. Rwanda improved its insolvency system by introducing provisions on voidable transactions and the approval of DB2016 Rwanda reorganization plans and by establishing additional safeguards for creditors in reorganization proceedings. Rwanda made paying taxes easier for companies by DB2016 Rwanda introducing electronic filing and making its use compulsory. Rwanda strengthened minority investor protections by introducing provisions allowing holders of 10% of a company’s shares to call for an extraordinary meeting of shareholders, requiring holders of special classes of shares to DB2016 Rwanda vote on decisions affecting their shares, requiring board members to disclose information about their directorships and primary employment and requiring that audit reports for listed companies be published in a newspaper. Rwanda made starting a business easier by eliminating the DB2016 Rwanda need for new companies to open a bank account in order to register for VAT. DB2016 Uganda Uganda made starting a business easier by introducing an Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 157 DB year Economy Reform online system for obtaining a trading license and by reducing business incorporation fees. Rwanda increased the time and cost for documentary and DB2016 Rwanda border compliance for importing by making preshipment inspection mandatory for all imported products. Tanzania reduced the time for both exporting and importing by implementing the Tanzania Customs Integrated System DB2016 Tanzania (TANCIS), an online system for downloading and processing customs documents. In Rwanda the electricity company made getting electricity DB2015 Rwanda less costly by eliminating several fees. Rwanda made dealing with construction permits easier by DB2015 Rwanda eliminating the fee for obtaining a freehold title and by streamlining the process for obtaining an occupancy permit. Uganda made resolving insolvency easier by consolidating all provisions related to corporate insolvency in one law, establishing provisions on the administration of companies DB2015 Uganda (reorganization), clarifying standards on the professional qualifications of insolvency practitioners and introducing provisions allowing the avoidance of undervalued transactions. Tanzania made paying taxes more complicated for companies by introducing an excise tax on money transfers. On the other DB2015 Tanzania hand, it made paying taxes less costly by reducing the rate of the skill and development levy. Tanzania made starting a business more difficult by DB2015 Tanzania increasing registration fees. Rwanda made starting a business more difficult by requiring DB2015 Rwanda companies to buy an electronic billing machine from a certified supplier. Tanzania made trading across borders easier by upgrading DB2015 Tanzania infrastructure at the port of Dar es Salaam. Uganda made trading across borders easier by implementing DB2015 Uganda the ASYCUDA World electronic system for the submission of export and import documents. Kenya made dealing with construction permits more costly by DB2015 Kenya increasing the building permit fees. Kenya made paying taxes more costly for companies by DB2015 Kenya increasing employers’ social security contribution rate. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 158 DB year Economy Reform Kenya improved its credit information system by passing legislation that allows the sharing of both positive and DB2015 Kenya negative credit information and establishes guidelines for the treatment of historical data. Rwanda improved access to credit by establishing clear priority rules outside bankruptcy for secured creditors and DB2015 Rwanda establishing clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures. Tanzania improved access to credit information by creating DB2015 Tanzania credit bureaus. Burundi made getting electricity easier by eliminating the electricity utility’s monopoly on the sale of materials needed DB2014 Burundi for new connections and by dropping the processing fee for new connections. Burundi made dealing with construction permits easier by DB2014 Burundi establishing a one-stop shop for obtaining building permits and utility connections. Burundi made paying taxes less costly for companies by DB2014 Burundi reducing corporate income tax rate. Burundi made transferring property easier by creating a one- DB2014 Burundi stop shop for property registration. Burundi made starting a business easier by allowing registration with the Ministry of Labor at the one-stop shop DB2014 Burundi and by speeding up the process of obtaining the registration certificate. Burundi made trading across borders easier by eliminating DB2014 Burundi the requirement for a preshipment inspection clean report of findings. Rwanda made dealing with construction permits easier and less costly by reducing the building permit fees, DB2014 Rwanda implementing an electronic platform for building permit applications and streamlining procedures. Tanzania made resolving insolvency easier through new rules clearly specifying the professional requirements and DB2014 Tanzania remuneration for insolvency practitioners, promoting reorganization proceedings and streamlining insolvency proceedings. Rwanda made resolving insolvency easier through a new law DB2014 Rwanda clarifying the standards for beginning insolvency proceedings; Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 159 DB year Economy Reform preventing the separation of the debtor’s assets during reorganization proceedings; setting clear time limits for the submission of a reorganization plan; and implementing an automatic stay of creditors’ enforcement actions. Rwanda made paying taxes easier and less costly for companies by rolling out its electronic filing system to the DB2014 Rwanda majority of businesses and by reducing the property tax rate and business trading license fee. Rwanda strengthened investor protections through a new law DB2014 Rwanda allowing plaintiffs to cross-examine defendants and witnesses with prior approval of the questions by the court. Rwanda made transferring property easier by eliminating the requirement to obtain a tax clearance certificate and by DB2014 Rwanda implementing the web-based Land Administration Information System for processing land transactions. Uganda made transferring property easier by eliminating the DB2014 Uganda need to have instruments of land transfer physically embossed to certify payment of the stamp duty. Rwanda made starting a business easier by reducing the time DB2014 Rwanda required to obtain a registration certificate. Rwanda made trading across borders easier by introducing an DB2014 Rwanda electronic single-window system at the border. Tanzania improved its credit information system through new regulations that provide for the licensing of credit reference DB2014 Tanzania bureaus and outline the functions of the credit reference data bank. Rwanda strengthened its secured transactions system by providing more flexibility on the types of debts and DB2014 Rwanda obligations that can be secured through a collateral agreement. Burundi made starting a business easier by eliminating the requirements to have company documents notarized, to DB2013 Burundi publish information on new companies in a journal and to register new companies with the Ministry of Trade and Industry. Kenya made paying taxes faster for companies by enhancing DB2013 Kenya electronic filing systems. Tanzania made starting a business easier by eliminating the DB2013 Tanzania requirement for inspections by health, town and land officers as a prerequisite for a business license. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 160 DB year Economy Reform Tanzania made dealing with construction permits more DB2013 Tanzania expensive by increasing the cost to obtain a building permit. Uganda made transferring property more difficult by introducing a requirement for property purchasers to obtain an income tax certificate before registration, resulting in delays at the Uganda Revenue Authority and the Ministry of DB2013 Uganda Finance. At the same time, Uganda made it easier by digitizing records at the title registry, increasing efficiency at the assessor’s office and making it possible for more banks to accept the stamp duty payment. Rwanda made enforcing contracts easier by implementing an DB2013 Rwanda electronic filing system for initial complaints. Uganda strengthened its insolvency process by clarifying rules on the creation of mortgages, establishing the duties of DB2013 Uganda mortgagors and mortgagees, defining priority rules, providing remedies for mortgagors and mortgagees and establishing the powers of receivers. Rwanda made getting electricity easier by reducing the cost DB2013 Rwanda of obtaining a new connection. Burundi reduced the time to trade across borders by enhancing its use of electronic data interchange systems, DB2013 Burundi introducing a more efficient system for monitoring goods going through transit countries and improving border coordination with neighboring transit countries. Tanzania made importing more difficult by introducing a DB2013 Tanzania requirement to obtain a certificate of conformity before the imported goods are shipped. Burundi made obtaining a construction permit easier by DB2013 Burundi eliminating the requirement for a clearance from the Ministry of Health and reducing the cost of the geotechnical study. Burundi made property transfers faster by establishing a DB2013 Burundi statutory time limit for processing property transfer requests at the land registry. Burundi strengthened investor protections by introducing new requirements for the approval of transactions between interested parties, by requiring greater corporate disclosure DB2012 Burundi to the board of directors and in the annual report and by making it easier to sue directors in cases of prejudicial transactions between interested parties. Kenya introduced a case management system that will help DB2012 Kenya increase the efficiency and cost-effectiveness of commercial Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 161 DB year Economy Reform dispute resolution. Tanzania made trading across borders faster by implementing DB2012 Tanzania the Pre-Arrival Declaration (PAD) system and electronic submission of customs declaration. Burundi amended its commercial code to establish DB2012 Burundi foreclosure procedures. Burundi made paying taxes easier for companies by reducing DB2012 Burundi the payment frequency for social security contributions from monthly to quarterly. In Rwanda the private credit bureau started to collect and distribute information from utility companies and also started DB2012 Rwanda to distribute more than 2 years of historical information, improving the credit information system. Rwanda reduced the frequency of value added tax filings by DB2012 Rwanda companies from monthly to quarterly. Rwanda made transferring property more expensive by DB2012 Rwanda enforcing the checking of the capital gains tax. Uganda increased the efficiency of property transfers by DB2012 Uganda establishing performance standards and recruiting more officials at the land office. Uganda introduced changes that added time to the process of obtaining a business license, slowing business start-up. But DB2012 Uganda it simplified registration for a tax identification number and for value added tax by introducing an online system. Rwanda made starting a business easier by reducing the DB2012 Rwanda business registration fees. Burundi made dealing with construction permits easier by DB2012 Burundi reducing the cost to obtain a geotechnical study. Uganda made it more difficult to start a business by DB2011 Uganda increasing the trade licensing fees. Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue DB2011 Kenya Authority’s electronic data interchange system for customs clearance. Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and DB2011 Rwanda implementing new time limits for the issuance of various permits. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 162 DB year Economy Reform Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with DB2011 Rwanda Uganda and other neighbors, leading to an improvement in the trade logistics environment. Uganda enhanced access to credit by establishing a new DB2011 Uganda private credit bureau. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that DB2011 Rwanda loans of all sizes be reported to the central bank’s public credit registry. Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, DB2011 Kenya merging the tax and value added tax registration procedures and digitizing records at the registrar. Kenya increased the administrative burden of paying taxes by DB2011 Kenya requiring quarterly filing of payroll taxes. Uganda continues to improve the efficiency of its court DB2011 Uganda system, greatly reducing the time to file and serve a claim. Burundi made paying taxes simpler by replacing the DB2011 Burundi transactions tax with a value added tax. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 163 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses to normal operation and increase returns to Time required to recover debt (years) creditors. By clarifying the expectations of creditors Measured in calendar years and debtors about the outcome of insolvency Appeals and requests for extension are proceedings, well-functioning insolvency systems can included facilitate access to finance, save more viable businesses and sustainably grow the economy. Cost required to recover debt (% of debtor’s estate) What do the indicators cover? Doing Business studies the time, cost and outcome of Measured as percentage of estate value insolvency proceedings involving domestic legal Court fees entities. These variables are used to calculate the Fees of insolvency administrators recovery rate, which is recorded as cents on the dollar recovered by secured creditors through Lawyers’ fees reorganization, liquidation or debt enforcement Assessors’ and auctioneers’ fees (foreclosure or receivership) proceedings. To Other related fees determine the present value of the amount recovered by creditors, Doing Business uses the Outcome lending rates from the International Monetary Fund, Whether business continues operating as a supplemented with data from central banks and the going concern or business assets are sold Economist Intelligence Unit. piecemeal In addition, Doing Business evaluates the adequacy Recovery rate for creditors and integrity of the existing legal framework applicable to liquidation and reorganization Measures the cents on the dollar recovered by proceedings through the strength of insolvency secured creditors framework index. The index tests whether economies Outcome for the business (survival or not) adopted internationally accepted good practices in determines the maximum value that can be four areas: commencement of proceedings, recovered management of debtor’s assets, reorganization Official costs of the insolvency proceedings are proceedings and creditor participation. deducted The ranking of economies on the ease of resolving Depreciation of furniture is taken into account insolvency is determined by sorting their distance to frontier scores for resolving insolvency. These scores Present value of debt recovered are the simple average of the distance to frontier Strength of insolvency framework index (0- scores for the recovery rate and the strength of 16) insolvency framework index. The Resolving Sum of the scores of four component indices: Insolvency indicator does not measure insolvency proceedings of individuals and financial institutions. Commencement of proceedings index (0-3) The data are derived from questionnaire responses Management of debtor’s assets index (0-6) by local insolvency practitioners and verified through a study of laws and regulations as well as public Reorganization proceedings index (0-3) information on bankruptcy systems Creditor participation index (0-4) Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 164 . A robust bankruptcy system functions as a filter, In addition, Doing Business evaluates the adequacy ensuring the survival of economically efficient and integrity of the existing legal framework companies and reallocating the resources of applicable to liquidation and reorganization inefficient ones. Fast and cheap insolvency proceedings through the strength of insolvency proceedings result in the speedy return of businesses framework index. The index tests whether to normal operation and increase returns to economies adopted internationally accepted good creditors. By clarifying the expectations of creditors practices in four areas: commencement of and debtors about the outcome of insolvency proceedings, management of debtor’s assets, proceedings, well-functioning insolvency systems can reorganization proceedings and creditor facilitate access to finance, save more viable participation. businesses and sustainably grow the economy. What do the indicators cover? Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used:  A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties.  The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater.  The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. The hotel cannot pay back the loan, but makes enough money to operate otherwise. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 165 RESOLVING INSOLVENCY Where do the region’s economies stand today? How efficient are insolvency proceedings in economies in the region and comparator regions provide a useful East African Community (EAC)? The global rankings of benchmark for assessing the efficiency of insolvency these economies on the ease of resolving insolvency proceedings. Speed, low costs and continuation of viable suggest an answer (figure 11.1). The average ranking of businesses characterize the top-performing economies. Figure 11.1 How economies in East African Community (EAC) rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 166 RESOLVING INSOLVENCY The indicators underlying the rankings may be more these indicators across the region and with averages revealing. Data collected by Doing Business show the both for the region and for comparator regions can average recovery rate and the average strength of provide useful insights. insolvency framework index (figure 11.2). Comparing Figure 11.2 How efficient is the insolvency process in economies in East African Community (EAC) Recovery Rate (0–100) Source: Doing Business database. Total Strength of Insolvency Framework index (0-16) Source: Doing Business database. * Indicates a “no practice” mark. See the data notes for details. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Note: Higher values indicate insolvency legislation that is better designed for rehabilitating viable firms and liquidating nonviable ones. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 167 RESOLVING INSOLVENCY What are the changes over time? A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in East African Community (EAC) (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How have economies in East African Community (EAC) made resolving insolvency easier—or not? By Doing Business report year DB2011 to DB2017 DB year Economy Reform Kenya streamlined the process of getting electricity by introducing the use of a geographic information system DB2017 Kenya which eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain an electricity connection. Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party DB2017 Kenya transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company. Kenya made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the DB2017 Kenya debtor’s business during insolvency proceedings and by introducing regulations for insolvency practitioners. Kenya made Registering property easier by increasing the DB2017 Kenya transparency at its land registry and cadastre. Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, memorandum and articles of association . Kenya also eliminated requirements to DB2017 Kenya sign compliance declarations before a commissioner of oaths. However, Kenya also made starting a business more expensive by introducing a flat fee for company incorporation. Rwanda made dealing with construction permits more cumbersome and expensive by introducing new requirements DB2017 Rwanda to obtain a building permit. It also strengthen the quality control index by implementing the qualifications required for architects and engineers. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 168 DB year Economy Reform Rwanda made enforcing contracts easier by introducing an DB2017 Rwanda electronic case management system for judges and lawyers. The credit bureau in Tanzania expanded credit bureau DB2017 Tanzania borrower coverage and began to distribute credit data from retailers. Rwanda made it easier to register property by introducing DB2017 Rwanda effective time limits and increasing the transparency of the land administration system. Uganda made starting a business easier by eliminating the DB2017 Uganda requirement that a commissioner of oaths must sign compliance declarations. Rwanda made starting a business easier by improving the DB2017 Rwanda online registration one-stop shop and streamlining post- registration procedures. Rwanda made trading across borders easier by removing the DB2017 Rwanda mandatory pre-shipment inspection for imported products. Uganda made trading across borders easier by constructing DB2017 Uganda the Malaba One-Stop Border Post which reduced border compliance time for exports. Uganda made paying taxes easier by eliminating a requirement for tax returns to be submitted in paper copy DB2017 Uganda following online submission. At the same time, Uganda increased the stamp duty for insurance contracts. Tanzania made paying taxes more complicated by increasing the frequency of filing of the skills Development Levy and DB2017 Tanzania more costly by introducing a workers’ compensation tariff paid by employers. Rwanda made paying taxes more complicated by introducing DB2017 Rwanda a requirement that companies file and pay social security contributions monthly instead of quarterly. Burundi made paying taxes easier by introducing a new tax DB2017 Burundi return and eliminating the personalized VAT declaration form. In Uganda the credit bureau expanded borrower coverage, DB2016 Uganda improving access to credit information. In Rwanda the credit bureau started to provide credit scores to banks and other financial institutions while the credit DB2016 Rwanda registry expanded borrower coverage, strengthening the credit reporting system. DB2016 Kenya The utility in Kenya reduced delays for new connections by Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 169 DB year Economy Reform enforcing service delivery timelines and hiring contractors for meter installation. Kenya made dealing with construction permits more difficult by requiring an additional approval before issuance of the DB2016 Kenya building permit and by increasing the costs for both water and sewerage connections Kenya made property transfers faster by improving electronic DB2016 Kenya document management at the land registry and introducing a unified form for registration. Kenya made starting a business easier by reducing the time it DB2016 Kenya takes to assess and pay stamp duty. Kenya improved access to credit information by passing DB2016 Kenya legislation that allows the sharing of positive information and by expanding borrower coverage. The utility in Uganda reduced delays for new electricity connections by deploying more customer service engineers DB2016 Uganda and reducing the time needed for the inspection and meter installation. Rwanda made dealing with construction permits easier by DB2016 Rwanda adopting a new building code and new urban planning regulations. Rwanda improved its insolvency system by introducing provisions on voidable transactions and the approval of DB2016 Rwanda reorganization plans and by establishing additional safeguards for creditors in reorganization proceedings. Rwanda made paying taxes easier for companies by DB2016 Rwanda introducing electronic filing and making its use compulsory. Rwanda strengthened minority investor protections by introducing provisions allowing holders of 10% of a company’s shares to call for an extraordinary meeting of shareholders, requiring holders of special classes of shares to DB2016 Rwanda vote on decisions affecting their shares, requiring board members to disclose information about their directorships and primary employment and requiring that audit reports for listed companies be published in a newspaper. Rwanda made starting a business easier by eliminating the DB2016 Rwanda need for new companies to open a bank account in order to register for VAT. Uganda made starting a business easier by introducing an DB2016 Uganda online system for obtaining a trading license and by reducing Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 170 DB year Economy Reform business incorporation fees. Rwanda increased the time and cost for documentary and DB2016 Rwanda border compliance for importing by making preshipment inspection mandatory for all imported products. Tanzania reduced the time for both exporting and importing by implementing the Tanzania Customs Integrated System DB2016 Tanzania (TANCIS), an online system for downloading and processing customs documents. In Rwanda the electricity company made getting electricity DB2015 Rwanda less costly by eliminating several fees. Rwanda made dealing with construction permits easier by DB2015 Rwanda eliminating the fee for obtaining a freehold title and by streamlining the process for obtaining an occupancy permit. Uganda made resolving insolvency easier by consolidating all provisions related to corporate insolvency in one law, establishing provisions on the administration of companies DB2015 Uganda (reorganization), clarifying standards on the professional qualifications of insolvency practitioners and introducing provisions allowing the avoidance of undervalued transactions. Tanzania made paying taxes more complicated for companies by introducing an excise tax on money transfers. On the other DB2015 Tanzania hand, it made paying taxes less costly by reducing the rate of the skill and development levy. Tanzania made starting a business more difficult by DB2015 Tanzania increasing registration fees. Rwanda made starting a business more difficult by requiring DB2015 Rwanda companies to buy an electronic billing machine from a certified supplier. Tanzania made trading across borders easier by upgrading DB2015 Tanzania infrastructure at the port of Dar es Salaam. Uganda made trading across borders easier by implementing DB2015 Uganda the ASYCUDA World electronic system for the submission of export and import documents. Kenya made dealing with construction permits more costly by DB2015 Kenya increasing the building permit fees. Kenya made paying taxes more costly for companies by DB2015 Kenya increasing employers’ social security contribution rate. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 171 DB year Economy Reform Kenya improved its credit information system by passing legislation that allows the sharing of both positive and DB2015 Kenya negative credit information and establishes guidelines for the treatment of historical data. Rwanda improved access to credit by establishing clear priority rules outside bankruptcy for secured creditors and DB2015 Rwanda establishing clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures. Tanzania improved access to credit information by creating DB2015 Tanzania credit bureaus. Burundi made getting electricity easier by eliminating the electricity utility’s monopoly on the sale of materials needed DB2014 Burundi for new connections and by dropping the processing fee for new connections. Burundi made dealing with construction permits easier by DB2014 Burundi establishing a one-stop shop for obtaining building permits and utility connections. Burundi made paying taxes less costly for companies by DB2014 Burundi reducing corporate income tax rate. Burundi made transferring property easier by creating a one- DB2014 Burundi stop shop for property registration. Burundi made starting a business easier by allowing registration with the Ministry of Labor at the one-stop shop DB2014 Burundi and by speeding up the process of obtaining the registration certificate. Burundi made trading across borders easier by eliminating DB2014 Burundi the requirement for a preshipment inspection clean report of findings. Rwanda made dealing with construction permits easier and less costly by reducing the building permit fees, DB2014 Rwanda implementing an electronic platform for building permit applications and streamlining procedures. Tanzania made resolving insolvency easier through new rules clearly specifying the professional requirements and DB2014 Tanzania remuneration for insolvency practitioners, promoting reorganization proceedings and streamlining insolvency proceedings. Rwanda made resolving insolvency easier through a new law DB2014 Rwanda clarifying the standards for beginning insolvency proceedings; Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 172 DB year Economy Reform preventing the separation of the debtor’s assets during reorganization proceedings; setting clear time limits for the submission of a reorganization plan; and implementing an automatic stay of creditors’ enforcement actions. Rwanda made paying taxes easier and less costly for companies by rolling out its electronic filing system to the DB2014 Rwanda majority of businesses and by reducing the property tax rate and business trading license fee. Rwanda strengthened investor protections through a new law DB2014 Rwanda allowing plaintiffs to cross-examine defendants and witnesses with prior approval of the questions by the court. Rwanda made transferring property easier by eliminating the requirement to obtain a tax clearance certificate and by DB2014 Rwanda implementing the web-based Land Administration Information System for processing land transactions. Uganda made transferring property easier by eliminating the DB2014 Uganda need to have instruments of land transfer physically embossed to certify payment of the stamp duty. Rwanda made starting a business easier by reducing the time DB2014 Rwanda required to obtain a registration certificate. Rwanda made trading across borders easier by introducing an DB2014 Rwanda electronic single-window system at the border. Tanzania improved its credit information system through new regulations that provide for the licensing of credit reference DB2014 Tanzania bureaus and outline the functions of the credit reference data bank. Rwanda strengthened its secured transactions system by providing more flexibility on the types of debts and DB2014 Rwanda obligations that can be secured through a collateral agreement. Burundi made starting a business easier by eliminating the requirements to have company documents notarized, to DB2013 Burundi publish information on new companies in a journal and to register new companies with the Ministry of Trade and Industry. Kenya made paying taxes faster for companies by enhancing DB2013 Kenya electronic filing systems. Tanzania made starting a business easier by eliminating the DB2013 Tanzania requirement for inspections by health, town and land officers as a prerequisite for a business license. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 173 DB year Economy Reform Tanzania made dealing with construction permits more DB2013 Tanzania expensive by increasing the cost to obtain a building permit. Uganda made transferring property more difficult by introducing a requirement for property purchasers to obtain an income tax certificate before registration, resulting in delays at the Uganda Revenue Authority and the Ministry of DB2013 Uganda Finance. At the same time, Uganda made it easier by digitizing records at the title registry, increasing efficiency at the assessor’s office and making it possible for more banks to accept the stamp duty payment. Rwanda made enforcing contracts easier by implementing an DB2013 Rwanda electronic filing system for initial complaints. Uganda strengthened its insolvency process by clarifying rules on the creation of mortgages, establishing the duties of DB2013 Uganda mortgagors and mortgagees, defining priority rules, providing remedies for mortgagors and mortgagees and establishing the powers of receivers. Rwanda made getting electricity easier by reducing the cost DB2013 Rwanda of obtaining a new connection. Burundi reduced the time to trade across borders by enhancing its use of electronic data interchange systems, DB2013 Burundi introducing a more efficient system for monitoring goods going through transit countries and improving border coordination with neighboring transit countries. Tanzania made importing more difficult by introducing a DB2013 Tanzania requirement to obtain a certificate of conformity before the imported goods are shipped. Burundi made obtaining a construction permit easier by DB2013 Burundi eliminating the requirement for a clearance from the Ministry of Health and reducing the cost of the geotechnical study. Burundi made property transfers faster by establishing a DB2013 Burundi statutory time limit for processing property transfer requests at the land registry. Burundi strengthened investor protections by introducing new requirements for the approval of transactions between interested parties, by requiring greater corporate disclosure DB2012 Burundi to the board of directors and in the annual report and by making it easier to sue directors in cases of prejudicial transactions between interested parties. Kenya introduced a case management system that will help DB2012 Kenya increase the efficiency and cost-effectiveness of commercial Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 174 DB year Economy Reform dispute resolution. Tanzania made trading across borders faster by implementing DB2012 Tanzania the Pre-Arrival Declaration (PAD) system and electronic submission of customs declaration. Burundi amended its commercial code to establish DB2012 Burundi foreclosure procedures. Burundi made paying taxes easier for companies by reducing DB2012 Burundi the payment frequency for social security contributions from monthly to quarterly. In Rwanda the private credit bureau started to collect and distribute information from utility companies and also started DB2012 Rwanda to distribute more than 2 years of historical information, improving the credit information system. Rwanda reduced the frequency of value added tax filings by DB2012 Rwanda companies from monthly to quarterly. Rwanda made transferring property more expensive by DB2012 Rwanda enforcing the checking of the capital gains tax. Uganda increased the efficiency of property transfers by DB2012 Uganda establishing performance standards and recruiting more officials at the land office. Uganda introduced changes that added time to the process of obtaining a business license, slowing business start-up. But DB2012 Uganda it simplified registration for a tax identification number and for value added tax by introducing an online system. Rwanda made starting a business easier by reducing the DB2012 Rwanda business registration fees. Burundi made dealing with construction permits easier by DB2012 Burundi reducing the cost to obtain a geotechnical study. Uganda made it more difficult to start a business by DB2011 Uganda increasing the trade licensing fees. Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue DB2011 Kenya Authority’s electronic data interchange system for customs clearance. Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and DB2011 Rwanda implementing new time limits for the issuance of various permits. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 175 DB year Economy Reform Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with DB2011 Rwanda Uganda and other neighbors, leading to an improvement in the trade logistics environment. Uganda enhanced access to credit by establishing a new DB2011 Uganda private credit bureau. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that DB2011 Rwanda loans of all sizes be reported to the central bank’s public credit registry. Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, DB2011 Kenya merging the tax and value added tax registration procedures and digitizing records at the registrar. Kenya increased the administrative burden of paying taxes by DB2011 Kenya requiring quarterly filing of payroll taxes. Uganda continues to improve the efficiency of its court DB2011 Uganda system, greatly reducing the time to file and serve a claim. Burundi made paying taxes simpler by replacing the DB2011 Burundi transactions tax with a value added tax. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 176 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING Doing Business presents results for two aggregate even though it is no longer at the frontier in a measures: the distance to frontier score and the ease of subsequent year. doing business ranking, which is based on the distance For scores such as those on the strength of legal rights to frontier score. The ease of doing business ranking index or the quality of land administration index, the compares economies with one another; the distance to frontier is set at the highest possible value. For the total frontier score benchmarks economies with respect to tax rate, consistent with the use of a threshold in regulatory best practice, showing the absolute distance calculating the rankings on this indicator, the frontier is to the best performance on each Doing Business defined as the total tax rate at the 15th percentile of the indicator. When compared across years, the distance to overall distribution for all years included in the analysis frontier score shows how much the regulatory up to and including Doing Business 2015. For the time to environment for local entrepreneurs in an economy has pay taxes the frontier is defined as the lowest time changed over time in absolute terms, while the ease of recorded among all economies that levy the three major doing business ranking can show only how much the taxes: profit tax, labor taxes and mandatory regulatory environment has changed relative to that in contributions, and value added tax (VAT) or sales tax. For other economies. the different times to trade across borders, the frontier is defined as 1 hour even though in many economies the Distance to Frontier time is less than that. The distance to frontier score captures the gap between In the same formulation, to mitigate the effects of an economy’s performance and a measure of best extreme outliers in the distributions of the rescaled data practice across the entire sample of 36 indicators for 10 for most component indicators (very few economies Doing Business topics (the labor market regulation need 700 days to complete the procedures to start a indicators are excluded). For starting a business, for business, but many need 9 days), the worst performance example, the former Yugoslav Republic of Macedonia is calculated after the removal of outliers. The definition and New Zealand have the smallest number of of outliers is based on the distribution for each procedures required (1), and New Zealand the shortest component indicator. To simplify the process two rules time to fulfill them (0.5 days). Slovenia has the lowest were defined: the 95th percentile is used for the cost (0.0), and Australia, Colombia and 103 other indicators with the most dispersed distributions economies have no paid-in minimum capital (including minimum capital, number of payments to pay requirement (table 14.1 in the Doing Business 2017 taxes, and the time and cost indicators), and the 99th report). percentile is used for number of procedures. No outlier is Calculation of the distance to frontier score removed for component indicators bound by definition Calculating the distance to frontier score for each or construction, including legal index scores (such as the depth of credit information index, extent of conflict of economy involves two main steps. In the first step interest regulation index and strength of insolvency individual component indicators are normalized to a common unit where each of the 36 component framework index) and the recovery rate (figure 14.1). indicators y (except for the total tax rate) is rescaled In the second step for calculating the distance to frontier using the linear transformation (worst − y)/(worst − score, the scores obtained for individual indicators for frontier). In this formulation the frontier represents the each economy are aggregated through simple averaging best performance on the indicator across all economies into one distance to frontier score, first for each topic since 2005 or the third year in which data for the and then across all 10 topics: starting a business, dealing indicator were collected. Both the best performance and with construction permits, getting electricity, registering the worst performance are established every five years property, getting credit, protecting minority investors, based on the Doing Business data for the year in which paying taxes, trading across borders, enforcing contracts they are established, and remain at that level for the five and resolving insolvency. More complex aggregation years regardless of any changes in data in interim years. methods—such as principal components and Thus an economy may set the frontier for an indicator unobserved components—yield a ranking nearly Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 177 identical to the simple average used by Doing Business3. than it would have had before (line D is bigger than line Thus Doing Business uses the simplest method: C in figure 14.2 of the Doing Business 2017 report). weighting all topics equally and, within each topic, giving The nonlinear transformation is not based on any equal weight to each of the topic components 4. economic theory of an “optimal tax rate” that minimizes An economy’s distance to frontier score is indicated on a distortions or maximizes efficiency in an economy’s scale from 0 to 100, where 0 represents the worst overall tax system. Instead, it is mainly empirical in performance and 100 the frontier. All distance to frontier nature. The nonlinear transformation along with the calculations are based on a maximum of five decimals. threshold reduces the bias in the indicator toward However, indicator ranking calculations and the ease of economies that do not need to levy significant taxes on doing business ranking calculations are based on two companies like the Doing Business standardized case decimals. study company because they raise public revenue in other ways—for example, through taxes on foreign The difference between an economy’s distance to companies, through taxes on sectors other than frontier score in any previous year and its score in 2015 manufacturing or from natural resources (all of which are illustrates the extent to which the economy has closed outside the scope of the methodology). In addition, it the gap to the regulatory frontier over time. And in any acknowledges the need of economies to collect taxes given year the score measures how far an economy is from firms. from the best performance at that time. Calculation of scores for economies with 2 cities Treatment of the total tax rate covered The total tax rate component of the paying taxes For each of the 11 economies in which Doing Business indicator set enters the distance to frontier calculation in collects data for the second largest business city as well a different way than any other indicator. The distance to as the largest one, the distance to frontier score is frontier score obtained for the total tax rate is calculated as the population-weighted average of the transformed in a nonlinear fashion before it enters the distance to frontier scores for these two cities (table distance to frontier score for paying taxes. As a result of 13.1). This is done for the aggregate score, the scores for the nonlinear transformation, an increase in the total tax each topic and the scores for all the component rate has a smaller impact on the distance to frontier indicators for each topic. score for the total tax rate—and therefore on the distance to frontier score for paying taxes—for economies with a below-average total tax rate than it would have had before this approach was adopted in Doing Business 2015 (line B is smaller than line A in figure 14.2 of the Doing Business 2017 report). And for economies with an extreme total tax rate (a rate that is very high relative to the average), an increase has a greater impact on both these distance to frontier scores 3 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 4 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. Indicators for all other topics are assigned equal weights Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 178 Table 13.1 Weights used in calculating the distance to implemented regulatory reforms making it easier to do frontier scores for economies with 2 cities covered business in 3 or more of the 10 topics included in this year’s aggregate distance to frontier score. Changes Economy City Weight (%) making it more difficult to do business are subtracted Dhaka 78 Bangladesh from the total number of those making it easier to do Chittagong 22 São Paulo 61 business. Twenty-four economies meet this criterion: Brazil Armenia; Azerbaijan; Benin; Costa Rica; Côte d’Ivoire; Rio de Janeiro 39 Shanghai 55 Cyprus; Hong Kong SAR, China; Indonesia; Jamaica; China Beijing 45 Kazakhstan; Kenya; Lithuania; Madagascar; Mauritania; Mumbai 47 Morocco; Romania; the Russian Federation; Rwanda; India Delhi 53 Senegal; Togo; Uganda; the United Arab Emirates; Jakarta 78 Uzbekistan; and Vietnam. Second, Doing Business sorts Indonesia Surabaya 22 these economies on the increase in their distance to Tokyo 65 Japan frontier score from the previous year using comparable Osaka 35 data. Mexico City 83 Mexico Monterrey 17 Selecting the economies that implemented regulatory Lagos 77 reforms in at least three topics and had the biggest Nigeria Kano 23 improvements in their distance to frontier scores is Karachi 65 intended to highlight economies with ongoing, broad- Pakistan Lahore 35 based reform programs. The improvement in the Moscow 70 Russian Federation distance to frontier score is used to identify the top St. Petersburg 30 New York 60 improvers because this allows a focus on the absolute United States improvement—in contrast with the relative improvement Los Angeles 40 Source: United Nations, Department of Economic and Social shown by a change in rankings—that economies have Affairs, Population Division, World Urbanization Prospects, made in their regulatory environment for business. 2014 Revision. http://esa.un.org/unpd/wup/CD- ROM/Default.aspx. Ease of Doing Business ranking Economies that improved the most across 3 or more The ease of doing business ranking ranges from 1 to 190. Doing Business topics in 2014/15 The ranking of economies is determined by sorting the Doing Business 2017 uses a simple method to calculate aggregate distance to frontier scores, rounded to 2 decimals. which economies improved the ease of doing business the most. First, it selects the economies that in 2014/15 Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 179 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 190 Contributors http://www.doingbusiness.org/rankings More than 12,500 specialists in 190 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 190 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 136 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, case studies and repreneurship customized economy and regional profiles http://www.doingbusiness.org/reports Distance to frontier Data benchmarking 190 economies to the frontier Methodology in regulatory practice and a distance to frontier The methodologies and research papers underlying calculator Doing Business http://www.doingbusiness.org/data/distance-to- http://www.doingbusiness.org/methodology frontier Research Information on good practices Abstracts of papers on Doing Business topics and Showing where the many good practices identified related policy issues by Doing Business have been adopted http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice Doing Business reforms Short summaries of DB2017 business regulation reforms and lists of reforms since DB2008 http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2017 EAST AFRICAN COMMUNITY (EAC) 180