Methodology and Best Practices Sylvia Solf Justin Yap Kuala Lumpur, Malaysia October 31, 2007

Doing Business: 10 indicators in 178 economies

2007
Starting a business Dealing with licenses Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a business

2008
Update of 2007 Add 3 countries Reformers Club: 11 case studies

2009
Add Not paying bribes Add Using infrastructure Research program on regulation and business opportunities for women

Top 30 on the Ease of Doing Business 2007

1. Singapore 2. New Zealand 3. United States 4. Hong Kong, China 5. Denmark 6. United Kingdom 7. Canada 8. Ireland 9. Australia 10. Iceland 11. Norway 12. Japan 13. Finland 14. Sweden 15. Thailand 16. Switzerland 17. Estonia 18. Georgia 19. Belgium 20. Germany 21. Netherlands 22. Latvia 23. Saudi Arabia 24. Malaysia 25. Austria 26. Lithuania 27. Mauritius 28. Puerto Rico 29. Israel 30. Korea

Malaysia in the region

Singapore Hong Kong, China Japan Thailand Malaysia Korea Brunei China Vietnam India Indonesia Philippines Cambodia Lao PDR

1 4 12 15 24 30 78 83 91 120 123 133 145 164

Time and Motion Indicators: How to lay a better brick

Focus on Steps, Time and Cost is Doing Business Basic Methodology

Starting a business in Madagascar
8 7 25%

Time (number of days)

20% 6 5 4 3 2 5% 1 0
Register at the GUIDE Apply for license, tax and statistical IDs Publish a notice in a daily newspaper File forms with the National Social Security Fund File for health insurance

15%

10%

0%

Cost (% of GNI per capita)

A time and motion study

1. Follow the entrepreneur from the beginning to the end of a basic transaction; 2. Record every step of the process, and the associated time and cost; 3. Gather all the relevant laws, regulations, decrees, fee schedules.

How Malaysia ranks in each indicator

Topic Starting a business Dealing with licenses Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a business Malaysias Rank 74 105 43 67 3 4 56 21 63 54 Worlds best Australia St. Vincent & the Grenadines United States New Zealand United Kingdom New Zealand Maldives Singapore Hong Kong, China Japan

1. Starting a Business Malaysias rank: 74

Starting a business measures:

All procedures that are required in law or in practice for an entrepreneur to start up and formally operate an industrial or commercial business, including:
Preregistration (name verification, notarization) Registration of the company Postregistration (social security, tax, company seal)

Starting a business: The company Is a limited liability company; Operates in Kuala Lumpur and does not engage in foreign trade; Has 5 owners who are all Malaysian nationals; Performs general industrial or commercial activities such as the production or sale of goods or services to the public (not subject to special tax regime and no heavily polluting processes); Leases its commercial plant and offices and does not own any real estate; Does not qualify for investment incentives or special benefits; Has at least 10 and up to 50 employees 1 month after the commencement of operations, all of them Malaysian nationals; Has start-up capital of 10 times income per capita at the end of 2006 (approx. 183,000 MYR); Has a turnover of at least 100 times income per capita; Has a company deed 10 pages long.

Starting a business measures:

Procedures (number):
any interaction with an external party; Both pre- and post-incorporation procedures that are officially required for an entrepreneur to legally operate a business are recorded; Both legal and common practice procedures are included; Shortcuts may be considered; Industry-specific procedures are excluded;

Time (days):
Median duration, recorded in calendar days; A procedure has a minimum duration of 1 day; Procedures may take place simultaneously but cannot begin the same day; If procedure can be accelerated for a cost, the fastest procedure is recorded; Each procedure starts with the first filing of the application or demand, and ends once the company has received the final document or service requested;

Cost (% of income per capita):

Only official feesno bribes or special relationships; recorded as percentage of GNI per capita;

Paid-in capital:
Before registration and up to 3 months following registration; measured as percentage of GNI per capita.

Starting a business in Malaysia: 9 procedures, 24 days, 18.1% of Starting a business in Malaysia: income per capita

Starting a business: Top 10 and what they have in common

1. Australia 2. Canada 3. New Zealand 4. United States 5. Ireland 6. United Kingdom 7. Puerto Rico 8. Mauritius 9. Singapore 10. Georgia

Minimum capital requirement nominal or zero Standardized forms No courts involved Online registration Fixed registration fee No publication in legal journal required

2. Dealing with Licenses Malaysias rank: 105

Dealing with licenses measures:

All procedures that are required in law or in practice to build a standardized warehouse, up to the point that the property can be used as collateral or transferred.

Dealing with licenses: The construction company (BuildCo) Is a limited liability company operating in Kuala Lumpur; Has 5 owners who are all Malaysian nationals; Is fully licensed and insured to construct buildings; Leases its commercial plant and offices and does not own any real estate; Has 20 employees, all Malaysians with the necessary technical and professional expertise to obtain construction permits & approvals; Has at least 1 employee who is a locally registered licensed architect; Has paid all taxes and taken out all insurance necessary to its business activity (e.g. accident insurance for workers and liability insurance); Owns the land on which the warehouse is built.

Dealing with Licenses: The warehouse Has road access and is located on the edge of Kuala Lumpur, but within city limits; Is 2 stories high and covers an area of 1,300.6 square meters. Each floor is 3 meters high; Is located on a land plot of 929 square meters, which is 100% owned by the construction company (BuildCo) and is accurately registered in the cadastre and land registry; Is a new construction; Has complete architectural and technical plans and is already insured; Will be connected to electricity, water, sewerage and one land phone line. The connection to each utility network will be 10 meters long; Will be used for general storage, such as storing books or stationery; Will include all technical equipment required to make the warehouse fully operational.

Dealing with licenses measures:

Procedures (number)
Every interaction with an external party (i.e. municipality, inspectors, utilities); All procedures legally or in practice required for building a warehouse, including connecting to electricity, water, sewage and phone services;

Time (days)
Median duration, recorded in calendar days; A procedure has a minimum duration of 1 day; Procedures may take place simultaneously but cannot begin the same day; If procedure can be accelerated for a cost, the fastest procedure is recorded; Each procedure starts with the first filing of the application or demand, and ends once the company has received the final document or service requested;

Cost (% of income per capita)

Only official feesno bribes or special relationships; recorded as percentage of GNI per capita.

Who must approve (and inspect) a new construction in Kuala Lumpur?

Telekom Malaysia 25 procedures Planning Department Engineering Department Water Authority

Building Department TNB Sewerage Services Department 285 days

Fire & Rescue Department

Drainage & Irrigation Department

Public Works Department

Town Services Department

10% of income per capita

Dealing with Licenses: Top 10 and what they have in common

1. St. Vincent and the Few pre-approval procedures required before obtaining a Grenadines building permit 2. New Zealand Interaction with one agency to 3. Belize obtain a building permit rather 4. Marshall Islands than following up with different offices and agencies 5. Singapore 6. Denmark 7. St. Kitts and Nevis 8. Maldives 9. Kenya 10. Micronesia Few inspections of the construction site by the authorities

3. Registering Property Malaysias rank: 67

Registering property measures:

All procedures that are required in law or in practice to transfer property title, up to the point that the property can be used as collateral or transferred.

Registering property: Seller and buyer companies

Are limited liability companies; Located on the outskirts of Kuala Lumpur; Privately owned by Malaysian nationals; Have 50 employees each, all Malaysian nationals; Perform general commercial activities.

Registering property: The property

Is sold for its market value of 50 times income per capita; Has been fully owned by the seller for the past 10 years; Is not subject to any mortgage; Is registered in the cadastre and/or land registry and is not the subject of any title disputes; Is located in a commercial zone on the outskirts of Kuala Lumpur, and does not require rezoning; Consists of a plot of land measuring 557.4 m on which stands a 2-storey warehouse with an area of 929m; the warehouse is 10 years old, in good condition, and complies with all safety standards; Will not be subject to renovations or additional building following the purchase; Will not be used for special purposes or require special permits; Has no trees, natural water sources, natural reserves or historical monuments of any kind; Has no occupants, legal or illegal

Registering property measures:

Procedures (number)
Every interaction of the seller, or their agent with an external party (i.e. municipality, inspectors, utilities) Buyer follows the fastest legal option

Time (days)
Recorded in calendar days Captures the median duration of each procedure Minimum time for each procedure is 1 day

Cost (% of property value)

Only official fees and taxes Recorded as a % of property value (which is 50 times income per capita) Both costs borne by the buyer and those borne by the seller are included

Registering property in Malaysia: 5 procedures, 144 days, 2.4% of income per capita

Total time to register property: 144 days

1. Sale-purchase agreement sent to Stamp Office for stamping (1 day) 3. Inspection and valuation of the property (36 days)

2. Memorandum of Transfer (14A) sent to Stamp Office for adjudication of Stamp Duty (1 day)

4. Memorandum of Transfer (14A) sent to Stamp Office for stamping (1 day)

5. The transfer is registered at the Land Office/Registry (144 days)

Registering Property: Top 10 and what they have in common

1. New Zealand 2. Saudi Arabia 3. Armenia 4. Lithuania 5. Slovakia 6. Norway 7. Sweden 8. Iceland 9. United Arab Emirates 10. United States

Reduce taxes or fees Speed procedures in the registry Computerize procedures and go online Combine and reduce procedures Speed procedures in the court Liberalize professions like surveyors, valuers and notaries

4. Trading across Borders Malaysias rank: 21

Trading Across Borders: the case

The business: Is a limited liability company located in Kuala Lumpur, outside of any export processing zone or industrial estate with special export or import privileges; Is 100% privately owned by Malaysian nationals; Has 100 or more employees; Exports more than 10% of its sales; The goods: Are not hazardous and does not consist of military items; Travel in a dry-cargo 20-foot full container; Do not require refrigeration or any other special environment; Do not require special environmental or other safety standards other than accepted international standards. Respondents: mainly freight forwarders, traders, customs and port authorities

Trading across borders measures:

Documents (number) All documents required to export and import the goods, including: Bank documents; Customs clearance and technical control documents; Port and terminal handling documents; Transport documents; Import licenses; Time (calendar days) For export, from the packing of goods at the factory to departure from the Port of Kelang; For import, from arrival at the Port of Kelang to arrival at the warehouse; Includes inland transport time, but not ocean transport time;

Cost (US dollars) All official fees for import and export; Does not include tariffs or trade taxes.

Trading across borders in Malaysia

Export 7 documents
Bill of lading Cargo release order Certificate of origin Commercial invoice Customs export declaration Packing list Technical standard/health certificate

18 days US$432

Import 7 documents
Bill of lading Cargo release order Certificate of origin Commercial invoice Customs import declaration Packing list Terminal handling receipts

14 days US$385

Trade documentation in Malaysia and the top 10 economies in overall ease of doing business

Number of documents needed for export and import

M a la ys ia Ic e la nd A us t ra lia Ire la nd C a na da Unit e d Kingdo m D e nm a rk H o ng Ko ng, C hina Unit e d S t a t e s N e w Z e a la nd S inga po re

Docum ents for Export

Docum ents for Im port

Trading across borders: Top 10 and what they have in common

1. Singapore 2. Denmark 3. Hong Kong, China 4. Norway 5. Finland 6. Sweden 7. Estonia 8. Israel 9. Panama 10. Germany

Reduce paperwork Use a single window Allow shippers to declare their manifest online even prior to arriving in port Limit physical inspections

5. Paying Taxes Malaysias rank: 56

Paying taxes: the company

Is a taxable limited liability company operating in Kuala Lumpur; Began operations in January 2005, when it purchased all the assets on its balance sheet and hired all its workers; Is 100% privately owned by 5 Malaysian nationals; Has a start-up capital of 102 times income per capita at the end of 2005; Produces ceramic flowerpots and sells them at retail; Owns 2 plots of land, 1 building, machinery, office equipment, computers and 1 truck, and leases 1 truck; Does not qualify for investment incentives or benefits; Does not engage in foreign trade or handle products subject to a special tax regime; Has 60 employees (4 managers, 8 assistants and 48 workers), all nationals; Has a turnover of 1,050 times income per capita; Makes a loss in the first year of operations; Has a gross pretax margin of 20%; Distributes 50% of profits as dividends at the end of the second year; Sells one of its plots of land at a profit during the second year; Has annual fuel costs for its trucks equal to twice income per capita;

Paying Taxes indicator measures:

Mandatory taxes/contributions paid or withheld in the second year of operation (FY 2006) Payments (number)method and frequency of payment Number of different taxes/contributions times the frequency of payment for each; Includes advance payments or withholdings; Includes consumption tax (sales or value added tax) withheld; If a tax may be filed electronically and is filed electronically by a majority of businesses, only one payment is counted, even if payments are more frequent; If a tax is paid through third parties, only one payment is counted; If 2 or more taxes or contributions are paid jointly on the same form, only one payment is counted;

Time (hours per year) Hours per year to prepare, file and pay three major types of taxes: Corporate income tax; VAT or sales tax; Labor taxes; Preparation time, filing time and payment time;

Total tax rate: Total amount of taxes payable as a percentage of commercial profits, generally: profit or corporate income tax; social contributions and labor taxes paid by the employer; property taxes, turnover and other taxes.

Paying taxes in Malaysia: 35 payments, 166 hours, 32.6% total tax rate

35 27 15
Number of tax payments in Malaysia compared with East Asia Pacific Region and OECD

Payments (number per year)

Malaysia Regional Average OECD

Paying Taxes: Top 10 and what they have in common

1. Maldives 2. Singapore 3. Hong Kong, China 4. United Arab Emirates 5. Oman 6. Ireland 7. Saudi Arabia 8. Kuwait 9. New Zealand 10. Kiribati

Online filing One tax per tax base Low rates and wide tax base Simplify tax administration

Scoring Indicators

3. Employing Workers Malaysias rank: 43

Employing workers: The company

Is a limited liability company; Operates in Kuala Lumpur; Is 100% Malaysian-owned; Operates in the manufacturing sector; Has 201 employees; Is subject to collective bargaining agreements in countries where such agreements cover more than half of the manufacturing sector and apply even to firms not party to them; Abides by every law and regulation but does not grant workers more benefits than what is legally mandated.

Employing workers: The worker

Is a non-executive, full-time male employee who has worked in the same company for 20 years, and is now 42 years old; Earns a salary plus benefits equal to the countrys average wage; Is a lawful citizen who belongs to the same race and religion as the majority of the countrys population; Resides in Kuala Lumpur; Is not a member of a labor union, unless membership is mandatory.

Employing workers measures: 1. Rigidity of employment index (0-100), the average of: Difficulty of hiring index (0-100) fixed term contracts, minimum wage Rigidity of hours index (0-100) provisions relevant to non-standard work schedules and annual leave Difficulty of firing index (0-100) required procedures for redundancy Firing cost (weeks of salary) Notice periods and severance pay for a redundant worker (in weeks of salary) plus 3. Non-wage labor cost (% of salary) Labor taxes payable by employer (% of workers wage)

2.

Difficulty of Hiring Index

Range Malaysia

Does the law prohibit the use of fixed-term contracts for permanent tasks (Yes/No)?

0 or 1

What is the maximum accumulative duration of fixed-term contracts?

5 years = 0 3-5 years = 0.5 <3 years = 1 <0.25 = 0 0.25-0.5 = 0.33 0.5-0.75 = 0.67 >0.75 = 1 0-100

What is the ratio of the minimum wage of a trainee/first-time employee to the average value added per worker? Difficulty of Hiring Index

Rigidity of Hours Index

Range Malaysia

Is night work restricted?

Yes/No

No

Is weekend work unrestricted?

Yes/No

No

Can the workweek consist of 5 days?

Yes/No

No

Can the workweek exceed 50 hours (including overtime) for 2 months a year? Is a worker automatically entitled to more than 21 working days of paid annual vacation?

Yes/No

No

Yes/No

No

0-100

Difficulty of Firing Index

Range Does the law prohibit terminating workers because of economic redundancy? Does an employer need to notify a third party to terminate 1 redundant worker? Does an employer need to notify a third party to terminate 25 redundant workers? Does an employer need third-party approval to terminate 1 redundant worker? Does an employer need third-party approval to terminate 25 redundant workers? Does the employer need to consider reassignment or retraining options before terminating for redundancy? Do priority rules apply for redundancy? Do priority rules apply for reemployment? Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No 0-100 Malaysia No Yes Yes No No No Yes No 30

Firing (i.e. retrenchment) costs: Comparing Malaysia and the top 10 in overall ease of doing business

Firing Costs, expressed in weeks of a workers salary

Malaysia Australia Ireland Canada United Kingdom Denmark Hong Kong, China United States New Zealand Singapore 0 0 0 4 10 20 30 40 50 60 70 80 0 62 22 4 24 28 75

Employing Workers: Top 10 and what they have in common

1. United States 2. Singapore 3. Marshall Islands 4. Georgia 5. Brunei 6. Tonga 7. Maldives 8. Australia 9. Palau 10. Denmark

Fixed-term contracts allowed without limit for permanent tasks Limited restrictions on night-time or weekly-holiday work Firing costs do not exceed the equivalent of two months salary No third-party approval required to dismiss workers and no priority rules in place Non-wage labor costs do not exceed 20%

6. Getting Credit Malaysias rank: 3

Getting credit indicators Legal rights index: 10 features of collateral/secured transactions law Credit information index: 6 features of credit information system plus Public credit registry coverage: Number of individuals and firms Percentage of adult population Private credit bureau coverage: Number of individuals and firms Percentage of adult population

Credit information Index

1. 2. 3. Are data on both firms and individuals distributed? Are both positive and negative data distributed? Does the registry distribute credit information from retailers, trade creditors or utility companies as well as financial institutions? Are more than 2 years of historical credit information available for distribution? Is data on all loans below 1% of income per capita distributed? Is it guaranteed by law that borrowers can access their data in the largest credit registry? Yes / No Yes / No Yes / No

4. 5. 6.

Yes / No Yes / No Yes / No 0-6

Credit information index

Answers for Malaysia are in bold. Public Registry Coverage equals 44.5% of adult population.

Methodology Legal Rights Index

1. Does the law allow all natural and legal persons to be party to collateral agreements? 2. Does the law allow for general descriptions of assets, so that all types of assets can be used as collateral? 3. Does the law allow for general descriptions of debt, so that all types of obligations can be secured? 4. Does a unified registry exist for all security rights in movable property? 5. Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? 6. Do secured creditors have absolute priority to their collateral in bankruptcy procedures? 7. During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? 8. During reorganization, is management's control of the company's assets suspended? 9. Does the law authorize parties to agree on out of court enforcement? 10. May parties have recourse to out of court enforcement without restrictions? Legal Rights Index Yes / No Yes / No Yes / No Yes / No Yes / No Yes / No Yes / No Yes / No Yes / No Yes / No 0-10

Answers for Malaysia are in bold. Malaysias total score is 8.

Getting Credit: Top 10 and what they have in common

1. United Kingdom 2. Hong Kong, China 3. Australia 4. Germany 5. Malaysia 6. New Zealand 7. Canada 8. Israel 9. Singapore 10. United States

Record positive and negative credit history Gather historical credit information going back at least 2 years, of both individuals and companies Utilities or retailers as well as banks provide credit information Allow all types of assets to be used as collateral Unified collateral registry Out-of-court enforcement of security rights

7. Protecting Investors Malaysias rank: 4

Protecting Investors: the case

Mr. James Mr. James owns 60% of Buyer Co. shares, sits on its board of directors Mr. James owns 90% of Seller Co. shares

Buyer Co.

Seller Co. Buyer Co. buys trucks from Seller Co.

Protecting Investors measures:

Extent of disclosure (0-10) who approves the transaction what needs to be disclosed, when and to whom Malaysias score: 10 Extent of director liability (0-10) available claims against Mr. James and the other directors what needs to be proven for each claim what remedies are available if they are found liable Malaysias score: 9 Ease of shareholder suits (0-10) access to company information for proving the investors case Malaysias score: 7

Strength of investor protection: average of the three indices Malaysias score: 8.7

Extent of Disclosure Index

Score 1. What corporate body can legally approve the transaction? CEO or managing director alone Board of directors or shareholders; Mr. James may vote Board of directors; Mr. James may not vote Shareholders; Mr. James may not vote 2. Is immediate disclosure to the public, regulator or shareholders required? No disclosure is required Disclosure of the transaction but not of the conflict of interest is required Disclosure of the transaction and of the conflict of interest is required 3. Is disclosure in the annual report required? Disclosure in the annual report is not required Disclosure of the transaction but not of the conflict of interest is required Disclosure of the transaction and of the conflict of interest is required 4. Must Mr. James disclose to the Board of Directors? No disclosure is required Disclosure of the conflict of interest is required without any specifics Full disclosure of material facts of the conflict of interest is required 5. Must an external body approve the transaction (Yes/No)? Total 0-3 0 1 2 3 0-2 0 1 2 0-2 0 1 2 0-2 0 1 2 0-1 0-10 1 10 2 2 2 Malaysia 3

Extent of Director Liability Index

Score 1. Can a shareholder plaintiff hold Mr. James liable for damages? No, or only for fraud or bad faith Only if Mr. James was negligent or influenced the approval If the transaction is unfair or prejudicial to other shareholders 2. Can a shareholder plaintiff hold the approving body liable for damages? No, or only for fraud or bad faith Only if the approving body was negligent If the transaction is unfair or prejudicial to other shareholders 3. Can a court void the transaction if the plaintiff is successful? No, or only for fraud or bad faith Only if the transaction is oppressive or prejudicial to other shareholders If the transaction is unfair or involves a conflict of interest 4. 5. 6. 7. Does Mr. James pay damages if the plaintiff is successful (Yes/No)? Does Mr. James pay back profits if the plaintiff is successful (Yes/No)? Can Mr. James be fined or imprisoned (Yes/No)? Can minority shareholders sue directly or derivatively for damages? Total Only shareholders holding 10% or more of share capital may sue Shareholders holding less than 10% of share capital may sue 0-2 0 1 2 0-2 0 1 2 0-2 0 1 2 0-1 0-1 0-1 0-1 0 1 0-10 9 1 1 1 1 1 2 Malaysia 2

Extent of Shareholder Suits Index

Score 1. What range of documents is available to the shareholder during trial? Information the defendant has indicated he/she will rely on for defense Information that directly proves specific facts in plaintiffs claim Any information relevant to the subject matter of the claim Any information that may lead to the discovery of relevant information 2. Can the plaintiff examine the defendant and witnesses directly? No Only if the judge approves the questions beforehand Yes, and the judge does not need to approve the questions beforehand 3. 4. 5. 6. Can the plaintiff obtain categories of relevant documents without identifying each document (Yes/No)? Can shareholders with 10% or less of share capital, without filing suit, request that a government inspector investigate the transaction (Yes/No)? Can shareholders with 10% or less of share capital inspect transaction documents before filing suit (Yes/No)? Is the standard of proof for civil suits lower than for criminal cases (Yes/No)? Total 0-4 1 2 3 4 0-2 0 1 2 0-1 0-1 0-1 0-1 0-10 0 0 0 1 7 2 Malaysia 4

Protecting Investors: Top 10 and what they have in common

1. New Zealand 2. Singapore 3. Hong Kong, China 4. Malaysia 5. Canada 6. Israel 7. United States 8. Ireland 9. South Africa 10. United Kingdom

Regulate approval of related-party transactions; Require extensive internal and external disclosure requirements for relatedparty transactions; Facilitate shareholder judicial redress for damage caused to company through self-dealing; Greater remedies against directors involved in harmful related-party transactions; Open company books for shareholder inspection.

8. Enforcing Contracts Malaysias rank: 63

Enforcing contracts: the case

The Premise: Seller and Buyer are two businesses located in Kuala Lumpur. Seller sells and delivers goods worth 200% of income per capita to Buyer, who refuses to pay disputing the quality of the goods. Seller sues Buyer in Kuala Lumpur Sessions Court (Mahkamah Sesyen Kuala Lumpur).

The claim equals 200% of income per capita (approx. 36,700 MYR); Seller attaches Buyers goods prior to obtaining judgment; Expert opinions are given on the quality of the goods; the parties each call an expert witness or the judge appoints an independent expert; Seller wins the case and Buyer does not appeal; Seller immediately moves to enforce the judgment through a public sale of Buyers movable assets (e.g. office equipment).

Enforcing contracts measures:

Procedures (number): Service of process; Trial and judgment; Enforcement of judgment through public sale of buyers movable goods; Measures procedures applicable to either civil or common law jurisdictions; Time (calendar days) Service of process; Trial and judgment; Enforcement of judgment through public sale of buyers movable goods; Includes waiting period between actions; Cost (% of value of claim) Court costs + average attorneys fees + enforcement fees Ease of Enforcing Contracts = Average of Rank on Time, Rank on Cost and Rank on Procedures)

Enforcing contracts in Malaysia

Procedures (number) Duration (days) Filing and service Trial and judgment Enforcement of judgment Cost (% of claim)* Attorney cost (% of claim) Court cost (% of claim) Enforcement Cost (% of claim)

30 600 60 360 180 27.5 20.2 1.1 6.2

Enforcing contracts: Top 10 and what they have in common

1. Hong Kong, China 2. Luxembourg 3. Latvia 4. Iceland 5. Singapore 6. Austria 7. Finland 8. United States 9. Norway 10. Korea

Specialized commercial courts Changes to procedural rules More efficient enforcement of judgments Introduce out-of-court enforcement of small or uncontested claims

9. Closing a Business Malaysias rank: 54

Closing a business: The business

Is a domestic limited liability company whose major asset is a hotel in downtown Kuala Lumpur (approx. 60 rooms); Has had average annual revenue of 1,000 times income per capita over the past 3 years; Took out a 10-year loan from a domestic bank 5 years ago, using the hotel real estate as security; Worth more as a going concern than it would be in a piecemeal liquidation Has a mortgage whose remaining principal is equal to the hotels market value; The companys founder owns 51% of shares, with no other shareholder holding more than 5% of the company; The hotel has a professional manager, 201 employees, and 50 suppliers; The bank is the only secured creditor, holding 74% of the outstanding debt; OWES A LOT OF PEOPLE MONEY: the bank (mortgage on the hotel property), suppliers, employees, back taxes and cant pay them.

Closing a business measures:

Time: How many years does it take to put the company through the bankruptcy process? Cost: What percentage of the estate value is spent going through the bankruptcy process? Recovery rate: How many cents on the dollar can claimants creditors, tax authorities and employees recover from the insolvent company?

Closing a business: Recovery rates in Malaysia and other countries

Closing a business in Malaysia: Time: 2.3 years Cost: 15% of estate value Recovery Rate: 38%
100 90 80 70 60 50 Recovery Rate 40 (percent) 30 20 10 0
Ja pa n
93% 79% 79%

42%

38%

36%

13%

12%

na

tra lia

si a

al ay si a

Ko n

Th ai la

Ch i

do ne

Au s

Ho n

In

In

di a

nd

Closing a business: Top 10 and what they have in common

1. Japan 2. Singapore 3. Norway 4. Canada 5. Finland 6. Ireland 7. Denmark 8. Netherlands 9. Belgium 10. United Kingdom

Establish creditors committees Increase creditors priority ranking Allow pre-insolvency proceedings Reduce time limits Minimize court involvement

Thank You

For more information, or if you would like to become a Doing Business contributor, please visit www.doingbusiness.org or contact us directly: Sylvia Solf: ssolf@worldbank.org Justin Yap: jyap1@worldbank.org