Iran Slips in WB’s Ease of Doing Business Ranking

EghtesadOnline: The World Bank’s latest report on ease of doing business shows Iran ranks 124th among the 190 economies, indicating a four-notch slide in Iran’s regulatory improvement from last year.

News ID: ۷۴۴۲۸۸

04 November 2017

The country’s overall distance to frontier score is 56.48, compared to last year’s 57.26. An economy’s distance to frontier is indicated on a scale from 0 to 100, where 0 represents the lowest performance and 100 the frontier, the World Bank reported on its website.

The annual report covers regulations affecting 11 areas of the life of a business measured between June 2016 and June 2017, according to Financial Tribune.

Following is an overview of Iran’s ranking in all 10 indexes in the report:

Starting a Business

This indicator records the number of procedures, time, cost and minimum capital required to open a new business.

Globally, Iran ranks 97th among 190 economies on the ease of starting a business in 2018 report. Last year it ranked 102nd.

It takes 8.5 procedures, 15 days and 1.4% of income per capita to start a business in Iran.

Dealing With Construction Permits

This area pertains to the procedures, time and cost required for a business in the construction industry to obtain all the approvals required to build a warehouse in the economy’s largest business city, connect it to basic utilities and register the warehouse so that it can be used as collateral or transferred to another entity.

Iran’s ranking on ease of dealing with construction permits stands at 25 in 2018 report, which is two spots higher than its ranking in 2017. According to data collected by Doing Business, dealing with construction permits in Iran requires 15 procedures, takes 99 days and costs 2% of the warehouse value.

Getting Electricity

The Doing Business report records all procedures required for a local business to obtain a permanent electricity connection and supply for a standardized warehouse, as well as the time and cost to complete them.

According to data, getting electricity in Iran requires six procedures, takes 77 days and costs 1,064.9% of income per capita, placing the country at 99th position in the global ranking. The country ranked 94th last year.

Registering Property

This indicator records the full sequence of procedures necessary for a business to purchase property from another business and transfer the property title to the buyer’s name.

Globally, Iran ranks 87th on the ease of registering property compared with its last year’s ranking of 86. The report suggests that registering a property in Iran requires seven procedures, takes 12 days and costs 5.7% of the property value.

Getting Credit

This area assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions. Credit information systems enable lenders’ rights to view a potential borrower’s financial history as well as permit borrowers to establish a good credit history that will allow easier access to credit.

Iran ranks 90th on the ease of getting credit. The country ranked 101st in last year’s report.

Protecting Investors

Protecting minority investors matters for the ability of companies to raise the capital they need to grow, innovate, diversify and compete.

The report measures the protection of minority investors from conflicts of interest through one set of indicators and shareholders’ rights in corporate governance through another.

Globally, Iran ranks 170th on the strength of minority investor protection index. The country ranked 165th last year.

Paying taxes

Using a case scenario, the Doing Business report measures the taxes and mandatory contributions that a medium-size company must pay in a given year as well as the administrative burden of paying taxes and contributions.

On average, firms in Iran make 20 tax payments a year, spend 344 hours a year filing, preparing and paying taxes and pay total taxes amounting to 44.7% of their profit, placing the country in the 150th global ranking among 190 nations. Doing business report last year placed Iran in the 100th spot.

Trading Across Borders

This indicator measures the time and cost for documentary and border compliance, including the time and cost for obtaining documents (such as time spent to get the document issued and stamped); preparing documents (such as time spent gathering information to complete the customs declaration or certificate of origin); processing documents (such as time spent waiting for the relevant authority to issue a phytosanitary certificate); presenting documents (such as time spent showing a port terminal receipt to port authorities); and submitting documents (such as time spent submitting a customs declaration to the customs agency in person or electronically).

According to data collected by Doing Business, documentary compliance for export takes 120 hours and costs $125. Border compliance for exports takes 101 hours and costs $565.

Documentary compliance for import takes 192 hours and costs $197.  Border compliance for import takes 141 hours and costs $660.

Globally, Iran stands at 166th spot in the ranking of economies on the ease of trading across borders. It ranked 170th in last year’s report.

Enforcing Contracts

The World Bank report measures the efficiency of the judicial system in resolving a commercial dispute before local courts.

Globally, Iran ranks 80th in the ranking, with contract enforcements taking 505 days, costing 17% of the value of the claim. The country previously ranked 70th.

Resolving Insolvency

A robust bankruptcy system functions as a filter, ensuring the survival of economically efficient companies and reallocating the resources of inefficient ones.

Fast and cheap insolvency proceedings result in the speedy return of businesses to normal operation and increase returns to creditors. This area studies the time, cost and outcome of insolvency proceedings involving domestic legal entities.

Globally, Iran ranks 160th in the ease of resolving insolvency ranking, with resolving insolvencies taking 4.5 years on average and costing 15% of the debtor’s estate. The previous ranking was 156th.