Doing Business in Cyprus

Sylvia SolfGlobal Product Lead, Investment Climate

Department, World Bank Group

NicosiaJuly 4th, 2014

Doing Business indicators – measuring business regulations throughout the lifecycle of a firm

2

DO NOT measure all aspects of the business environment such as macroeconomic stability, corruption, level of labor skills, proximity to markets, or of regulation specific to foreign investment or financial markets.

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Methodology – How complex are simple transactions if all rules are followed?

• Measure procedural efficiency of the regulatory process• Follow the entrepreneur from the beginning to the end of a basic transaction• Record every step of the process, and the associated time and cost• Gather all the relevant laws, regulations, decrees and fee schedules

Focus on regulations relevant to a small to medium-sized domestic business.

Built on standardized case scenarios.

Are measured for the most populous city in each country.

Are focused on the formal sector.

Extent of Disclosure• Approval of related-party transactions

• Disclosure requirements

Extent of Director Liability• Ability to hold interested party liable

• Available remedies

Ease of Shareholder Suit• Information available during trial

•Access to company documents

Example: Protecting Investors• Measures disclosure requirements,

liability rules and legal recourse options for shareholders when directors do not act in their interest

• Where those rules are stronger, investors are more likely to invest

• Assigns value based on laws, regulation

How strong are regulations in protecting investors and property rights?

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Average ranking on sets of Doing Business indicators

Complexity and cost of regulatory processes

Stre

ngth

of l

egal

insti

tutio

ns

107

88

29

Sub-Saha-ran Africa

142

South Asia

100

71

Complex and expensive

Stronger

Weaker

Weaker legal institutions but simpler and less expensive regulatory processes

Stronger legal institutions andsimpler and less expensive

regulatory processes

Stronger legal institutions but more complex and expensiveregulatory processes

Weaker legal institutions andmore complex and expensive regulatory processes

Simple and inexpensive

121

Latin America & Caribbean

Europe & Cen-tral Asia

OECD high income

East Asia & Pacific

Middle East & North Africa

High rank on the ease of doing business – a result of efficient regulatory processes and strong legal

institutions

OECD high-income economies have the most business-friendly regulatory environment on both dimensions

Size of bubble represents number of economies 5

6

Strong correlation between Ease of Doing Business and Global Competitiveness Index

11 EU members in the top 30 on the ease of doing business

1. Singapore

2. Hong Kong SAR, China

3. New Zealand

4. United States

5. Denmark

6. Malaysia

7. Korea, Rep.

8. Georgia

9. Norway

10. United Kingdom

11. Australia

12. Finland

13. Iceland

14. Sweden

15. Ireland

16. Taiwan, China

17. Lithuania

18. Thailand

19. Canada

20. Mauritius

21. Germany

22. Estonia

23. United Arab Emirates

24. Latvia

25. Macedonia, FYR

26. Saudi Arabia

27. Japan

28. Netherlands

29. Switzerland

30. Austria

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Pace of reforms remains strong in 2012/13: share of economies with at least one reform making it easier to do business

OECD high Income Europe and

Central Asia

Middle East and North Africa

South Asia

East Asia and Pacific

Sub-Saharan Africa

Latin America & the

Caribbean

Worldwide, 114 economies implemented 238 reforms in 2012/2013, 18% rise with respect to 2011/2012. While in the EU, 17 economies implemented 38 reforms in 2012/2013.

66%

40%

75%

60%

58%

53%

73%

61%

EU-28

8

Irela

nd

Denm

ark

Unite

d Ki

ngdo

m

Finla

nd

Swed

en

Germ

any

Aust

ria

Neth

erla

nds

Belg

ium

Esto

nia

Lithu

ania

Latv

ia

Spai

n

Fran

ce

Port

ugal

Slov

ak R

epub

lic

Bulg

aria

Cypr

us

Hung

ary

Rom

ania

Luxe

mbo

urg

Italy

Turk

ey

Slov

enia

Pola

nd

Czec

h Re

publ

ic

Gree

ce

Croa

tia

55

60

65

70

75

80

85

90

Distance to Frontier, DB2009-2014

DB2014

DB2009

Malta was not included in Doing Business 2009 report

Cyprus has made efforts to improve its business regulations, but others are moving faster

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On average, Cyprus compares well to other EU countries

MaltaCroatia

Czech RepublicRomania

GreeceItaly

LuxembourgBulgariaHungary

SpainSlovak Republic

Poland Regional average

CyprusFrance

BelgiumSloveniaPortugalAustria

NetherlandsLatvia

EstoniaGermanyLithuania

IrelandSwedenFinland

United KingdomDenmark

0 21 42 63 84 105 126 147 168 189

103 89

75 73 72

65 60

58 54

52 49

45 42

39 38

36 33

31 30

28 24

22 21

17 15 14

12 10

5

1

Rank

10

But performance varies greatly among different areas of the regulatory environment

Starting a business

Dealing with construction

permits

Getting elec-tricity

Registering property

Getting credit

Protecting investors

Paying taxes Trading across borders

Enforcing contracts

Resolving insolvency

70 76 7464 56

69 62

38 45 3944

86108 103

55

34 33 27

110

24

EU-28 in DB 14 Cyprus DB 14

Highest 1

Lowest 189

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12

Cyprus has a strong regulatory framework in some areas

• Minority shareholders benefit from comparatively strong approval and disclosure requirements in related-party transactions

• Secured transactions legislation supports the use of movable collateral

13

But enforcement and commercial dispute resolution can be slow

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How much credit information is shared?

Number of economies in EU with each score on credit information index

Cyprus

15

Construction formalities involve multiple agencies and approvals

It takes 677 days to complete all formalities and obtain clearances to build a warehouse in Nicosia

Town planning permit4

Building permit

Updating of the land title

16

Getting an electricity connection takes 247 days and involves clearances from at least 6 agencies

Registering property is not complex but comparatively costly

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18

Transaction costs could be further reduced in other areas as well

Source: Doing Business 2014 report, World Bank Group.

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Complexity and cost of regulatory processes

• Starting a Business: Australia and Canada have a one-stop shop to start a business and have no minimum capital requirement

• Trading across borders: Germany adopted all the good practices in this area, such as allowing electronic submission and processing documents and using risk-based inspections

• Paying Taxes: Spain, Sweden and the United Kingdom have one tax per tax base and allow self-assessment

• Registering Property: Singapore use an electronic database for encumbrances

• Dealing with construction permits: Hong Kong, SAR China has a one-stop shop to deliver building permits

• Getting Electricity: Iceland and Korea, Rep. adopted all the good practices in this area, including providing transparent connection costs and processes

Strength of legal institutions

• Protecting Investors: Canada regulates the approval of related party transactions and clearly define duties for directors

• Getting Credit: Malaysia and United Kingdom allow a general description of collateral and maintain a unified registry

• Enforcing Contracts: Germany adopted all the good practices in this area, such as maintaining specialized commercial courts.

• Resolving Insolvency: Japan and New Zealand have a legal framework for out-of-court workout

Global best performers adopted most of the good practices across all areas measured

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Thank you!