doing business in bhutan -ifc

8/6/2019 Doing Business in Bhutan -IfC

1/74

Bhutan


2/74

2011 The International Bank for Reconstruction and Development / The World Bank

1818 H Street NW

Washington, DC 20433

Telephone 202-473-1000

Internet www.worldbank.org

All rights reserved.

1 2 3 4 08 07 06 05

A copublication of The World Bank and the International Finance Corporation.

This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions

expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the

governments they represent. The World Bank does not guarantee the accuracy of the data included in this work.

Rights and Permissions

The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without

permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will

normally grant permission to reproduce portions of the work promptly.

For permission to photocopy or reprint any part of this work, please send a request with complete information to the

Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone 978-750-8400; fax

978-750-4470; Internet www.copyright.com.

All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the

Publisher,The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax 202-522-2422; e-mail

[email protected].

Additional copies ofDoing Business 2011: Making a Difference for Entrepreneurs, Doing Business 2010:

Reforming through Difficult Times, Doing Business 2009, Doing Business 2008, Doing Business 2007: How to

Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth and

Doing Business in 2004:Understanding Regulations may be purchased at www.doingbusiness.org.

ISBN: 978-0-8213-7960-8

E-ISBN: 978-0-8213-8630-9

DOI: 10.1596/978-0-8213-7960-8

ISSN: 1729-2638

Library of Congress Cataloging-in-Publication data has been applied for.

Printed in the United States


3/74

Current featuresNews on the Doing Business project

http://www.doingbusiness.org

RankingsHow economies rank-from 1 to 183

http://www.doingbusiness.org/rankings/

Business reformers

Short summaries of DB2011 business reforms, lists of reformers

since DB2004 and a ranking simulation tool

http://www.doingbusiness.org/reforms/

Historical data

Customized data sets since DB2004

http://www.doingbusiness.org/custom-query/

Methodology and research

The methodologies and research papers underlyingDoing Business

http://www.doingbusiness.org/Methodology/

Download reportsAccess toDoing Business reports as well as subnational and regional

reports, reform case studies and customized country and regional

profiles

http://www.doingbusiness.org/reports/

Subnational and regional projects

Differences in business regulations at the subnational and regional

level

http://www.doingbusiness.org/subnational-reports/

Law library

Online collection of business laws and regulations relating to

business and gender issues

http://www.doingbusiness.org/law-library/

http://wbl.worldbank.org/

Contributors

More than 8,200 specialists in 183 economies who participate in

Doing Business

http://www.doingbusiness.org/contributors/Doing-Business/

Business Planet

Interactive map on the ease of doing business

http://rru.worldbank.org/businessplanet

Contents

Introduction

and Aggregate Rankings

5 - Year Measure of

Cumulative Change

Starting a Business

Dealing with

Construction Permits

Registering Property

Getting Credit

Protecting Investors

Paying Taxes

Trading Across Borders

Enforcing Contracts

Closing a Business

Doing Business 2011

Business Reforms


4/74

1

Doing Business 2011: Making a Difference for Entrepreneurs is the eighth in a series of annual reports investigating regulations

that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations

and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe, over time.

A set of regulations affecting 9 stages of a business s life are measured: starting a business, dealing with construction permits,

registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a

business. Data inDoing Business 2011 are current as of June 1, 2010*. The indicators are used to analyze economic outcomes and

identify what reforms have worked, where, and why.

TheDoing Business methodology has limitations. Other areas important to business such as an economy s proximity to large

markets, the quality of its infrastructure services (other than those related to trading across borders), the security of property from

theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of

institutions, are not studied directly byDoing Business . To make the data comparable across economies, the indicators refer to a

specific type of business, generally a local limited liability company operating in the largest business city. Because standard

assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight

the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policymakers in

designing reform.

The data set covers 183 economies: 46 in Sub-Saharan Africa, 32 in Latin America and the Caribbean, 25 in Eastern Europe and

Central Asia, 24 in East Asia and Pacific, 18 in the Middle East and North Africa and 8 in South Asia, as well as 30 OECD

high-income economies.

The following pages present the summaryDoing Business indicators for Bhutan. The data used for this economy profile come

from theDoing Business database and are summarized in graphs. These graphs allow a comparison of the economies in each

region not only with one another but also with the good practice economy for each indicator.

The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity

to provide good examples of business regulation to other countries. These good-practice economies do not necessarily rank

number 1 in the topic or indicator, but they are in the top 10.

More information is available in the full report.Doing Business 2011: Making a Difference for Entrepreneurs presents the

indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with information on

ordering the report, are available on theDoing Business website (www.doingbusiness.org).

*Except for the Paying Taxes indicator, which covers the period January to December of 2009.

Note: Doing Business 2010 data and rankings have been recalculated to reflect changes to the methodology.


5/74

Economy Rankings - Ease of Doing Business

Bhutan's ranking in Doing Business 2011

Bhutan - Compared to global good practice economy as well as selected economies:

Bhutan is ranked 142 out of 183 economies. Singapore is the top ranked economy in the Ease of Doing Business.

Doing Business 2011

Ease of Doing Business 142

Starting a Business 84

Dealing with Construction Permits 123

Registering Property 48

Getting Credit 176

Protecting Investors 132

Paying Taxes 94

Trading Across Borders 161

Enforcing Contracts 33

Closing a Business 183

Rank

2


6/74

Summary of Indicators - Bhutan

Starting a Business Procedures (number) 8

Time (days) 46

Cost (% of income per capita) 7.2

Paid-in Min. Capital (% of income per capita) 0.0

Dealing with Construction Permits Procedures (number) 25

Time (days) 183

Cost (% of income per capita) 132.8

Registering Property Procedures (number) 5

Time (days) 64

Cost (% of property value) 0.0

Getting Credit Strength of legal rights index (0-10) 2

Depth of credit information index (0-6) 0

Public registry coverage (% of adults) 0.0

Private bureau coverage (% of adults) 0.0

Protecting Investors Extent of disclosure index (0-10) 5

Extent of director liability index (0-10) 3

Ease of shareholder suits index (0-10) 4

Strength of investor protection index (0-10) 4.0

Paying Taxes Payments (number per year) 18

Time (hours per year) 274

Profit tax (%) 35.1

Labor tax and contributions (%) 1.1

Other taxes (%) 4.4

Total tax rate (% profit) 40.6

Trading Across Borders Documents to export (number) 8

Time to export (days) 38

Cost to export (US$ per container) 1352

Documents to import (number) 11

Time to import (days) 38

Cost to import (US$ per container) 26653


7/74

Enforcing Contracts Procedures (number) 47

Time (days) 225

Cost (% of claim) 0.1

Closing a Business Recovery rate (cents on the dollar) 0.0

Time (years) no practice

Cost (% of estate) no practice


8/74

The 5-year measure of cumulative change illustrates how the business regulatory environment has changed in 174 economies* from

Doing Business 2006toDoing Business 2011. Instead of highlighting which economies currently have the most business friendly

environment, this new approach shows the extent to which an economys regulatory environment for business has changed compared

with 5 years ago.

This figure shows the distribution of cumulative change across the 9 indicators and time between Doing Business 2006andDoing

Business 2011.

This snapshot reflects all cumulative changes in an economys business regulation as measured by the Doing Business indicators --

such as a reduction in the time to start a business thanks to a one-stop shop or an increase in the strength of investor protection index

thanks to new stock exchange rules that tighten disclosure requirements for related-party transactions.

-0.04

-0.02

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

India Bangladesh Maldives Afghanistan Bhutan Nepal Pakistan

Doing

business has

become

easier

Doing

business has

become

more difficult

or more

costly

DB change score

Note: This year's DB change score ranges from -0.1 to 0.54. More details on how the DB change score is constructed can be found

in the methodology section of the website.

* Bahrain, The Bahamas, Brunei, Cyprus, Kosovo, Liberia, Luxembourg, Montenegro and Qatar do not feature in the new metric

because they were included in theDoing Business report in years subsequent to the Doing Business 2005 report and hence, 5 years

of data are not yet available.


9/74

6


10/74

1. Benchmarking Starting a Business Regulations

Bhutan is ranked 84 overall for Starting a Business.

Ranking of Bhutan in Starting a Business - Compared to good practice and selected economies:

7


11/74

Procedures

(number)

Time (days) Cost (% of

income per

capita)

Paid-in Min.

Capital (% of

income per

capita)

Denmark 0.0

New Zealand 1 1 0.0

Good Practice

Economies

Bhutan 8 46 7.2 0.0

Selected Economy

Af hanistan 4 7 26.7 0.0

Ban ladesh 7 19 33.3 0.0

India 12 29 56.5 188.8

Maldives 5 9 9.4 3.7

Ne al 7 31 46.6 0.0

Pakistan 10 21 10.7 0.0

Comparator Economies

The following table shows Starting a Business data for Bhutan compared to good practice and comparator economies:

8


12/74

Starting a Business data Doing Business

2008

Doing Business

2009

Doing Business

2010

Doing Business

2011

Rank .. .. 79 84

Procedures (number) 8 8 8 8

Time (days) 48 46 46 46

Cost (% of income per capita) 10.4 8.5 8.0 7.2

Paid-in Min. Capital (% of income per capita) 0.0 0.0 0.0 0.0

2. Historical data: Starting a Business in Bhutan

3. Starting a Business sub indicators in Bhutan over the past 4 years

9


13/74

4. Overview of the steps to Starting a Business in Bhutan

It requires 8 procedures, takes 46 days, and costs 7.16 % GNI per capita to start a business in Bhutan.

No: ProcedureTime to complete

(days)Cost to complete

Obtain a clearance from the Royal Bhutan Police1 15 no charge

The company submits project proposal to Department of

Industry, Project Development Services Division

2 19 BTN 600

Register with the Registrar of Companies3 3 BTN 2000

Apply for a trade/industrial license at the Regional Trade

and Industrial Office (under Ministry of Trade)

4 2 Registration fee,

license fee, booklet

charge (see

comment)

Apply for taxpayer identification number and register thecompany for specific taxes

5 2 no charge

Make a company seal6 5 BTN 879

Open a bank account7 * 1 no charge

File the evidence of operating a bank account with the

Registrar of Companies

8 * 1 no charge

10


14/74

* Takes place simultaneously with another procedure.

11


15/74

Procedure Obtain a clearance from the Royal Bhutan Police1

Time to complete(days): 15

Cost to complete: no charge

Comment: The Royal Bhutan Police checks the criminal record with the criminal branch and the respective

district where the applicant originally lived. This clearance can be sought up to a year in advance.

Procedure The company submits project proposal to Department of Industry, Project DevelopmentServices Division

2


Cost to complete: BTN 600

Comment: The Project Development Services Division (PDSD) reviews the project proposal. At the same

time, if required, the Department of Industry sends a letter (with a copy of the project proposal) for

sectoral clearance to the National Environment Commission for Environment Clearance (which

takes at most 3 months) and other sectors. If sectoral clearance is required, the promoter usually

waits for 2 to 3 months for a PDSD response, after which a detailed report must be filed. The

promoter may take 1 to 2 months to prepare the report.

5. Details on Starting a Business in Bhutan

This table summarizes the procedures and costs associated with setting up a business in Bhutan.

STANDARDIZED COMPANY

Legal Form: Limited Liability Company

Paid-in Minimum Capital: 0.0

City: Thimphu

(% of income per capita)

12


16/74

On August 24, 2005, the Regional Trade and Industry Office (RTIO) was empowered to issue

environmental clearances for seventeen listed sectors (in lieu of the Environmental Unit).

Since September 26, 2005, the RTIO (in lieu of the PDSD) can also approve small and

cottage-scale projects with a fixed investment of up to BTN 10 million in the listed sectors.

However, companies to be registered by the Registrar of Companies still must obtain the

Environment Clearance from the National Environment Commission (NEC) before registering at

the Registrar of Companies, if applicable.

Procedure Register with the Registrar of Companies3



Comment: The following six documents must be attached to the articles of incorporation:

1. Company name availability form.

2. Consent to act as director, duly filed by all directors.

3. Security clearance from the Royal Bhutan Police for all the directors.

4. Copy of citizenship identification card for all directors.

5. Declaration of compliance form signed by all directors.

6. Project approval from the Ministry of Industry (that is, the PDSD).

If required and if every formality is fulfilled in about 30 days, the Registrar of Companies will

issue the letter of registration. At present, only local companies can be registered. Advertisement is

optional. A company may choose to publish a notice in the weekly newspaper, the Kuensel, by

booking at least a week in advance.

If the articles of association or incorporation are satisfactory, the Registrar of Companies will

record all information in its computer database, CREG, and print two copies of the certificate of

incorporation. A hard copy file is also opened for the new company.

Registration Incorporation Fee by Authorized Share Capital (as established by Schedule 4 of the

Companies Act of the Kingdom of Bhutan, 2000):

- Authorized share capital not exceeding BTN 1 million: BTN 1,000.

- Authorized share capital not exceeding BTN 1 million but less than BTN 2 million BTN 1,500.

- Authorized share capital not exceeding BTN 2 million: BTN 2,000.

Upon incorporation, companies must obtain a trade or industry operating license. As of 2007, the

process was reformed. Only industrial companies must obtain an additional clearance from (a) the

City Council (known as the City Corporation) in the urban areas and (b) the Office of the District

Administrators in the districts. The City Corporation verifies the site location and whether it is

legally owned. A form is presented to the City Council or to the Office of the District

Administrator, depending on the location, and to the Regional Trade and Industry Office. This

form can be obtained for a fee of BTN 50 from the Office of the Regional Director, Regional

Trade and Industry Office in Thimphu, Pheuntsholing, Gelephu, Samdrup Jongkhar, Traongsa, and

Trashigang. No fee is charged for the additional clearance by the City Council or the District

Administrator.

Procedure Apply for a trade/industrial license at the Regional Trade and Industrial Office (underMinistry of Trade)

4


Cost to complete: Registration fee, license fee, booklet charge (see comment)

Comment: No business activity can be carried out before obtaining a trade or industrial license. Sectoral

approvals (if required) must be obtained. Businesses with more than BTN1 million must present a

project report, according to guidelines issued by the Ministry of Trade and Industry.

Fee Schedule

13


17/74

Scale Investment (BTN million) Registration fees License fees License cost

Booklets

Large More than 100 8,000 4,000 100

12,100

Medium 10 100 4,000 2,000 100

6,100

Small 110 2,000 1,000 100

3,100Cottage Less than 1 1,000 500 100

1,600

Since July 1, 2005, applications forms for trade and industrial licenses can be downloaded from

the Ministry of Trade and Industrys website (www.mti.gov.bt). Photocopies of application forms

are accepted.

Procedure Apply for taxpayer identification number and register the company for specific taxes5



Comment: Every company must register for business income tax, for which a business identification code

(BIC) is given. This BIC number must be presented to obtain a business license and to participate

in public tenders and works. In practice, companies may register when they pay their first tax

installment.

Procedure Make a company seal6



Comment: Companies must have a seal within 1 year of incorporation. This is verified by the Registrar during

the annual inspection.

Procedure Open a bank account7



Comment: Under the Company Act 2000, a bank account under the companys name must be opened within a

month of incorporation.

Procedure File the evidence of operating a bank account with the Registrar of Companies8



Comment: Evidence of bank account operation must be presented and filed with the Registrar of Companies

once the certificate is issued and upon obtaining the license.

14


18/74

15


19/74

1. Benchmarking Dealing with Construction Permits Regulations

Bhutan is ranked 123 overall for Dealing with Construction Permits.

Ranking of Bhutan in Dealing with Construction Permits - Compared to good practice and selected economies:

16


20/74

Procedures

(number)


income per

capita)

Denmark 6

Qatar 0.8

Singapore 25

Good Practice

Economies

Bhutan 25 183 132.8

Selected Economy

Af hanistan 13 340 11355.3

Ban ladesh 14 231 558.1

India 37 195 2143.7

Maldives 9 118 20.3

Ne al 15 424 192.1

Pakistan 12 223 575.7


The following table shows Dealing with Construction Permits data for Bhutan compared to good practice and comparator

economies:

17


21/74

Dealing with Construction Permits data Doing Business

2008

Doing Business

2009

Doing Business

2010

Doing Business

2011

Rank .. .. 126 123


Time (days) 183 183 183 183

Cost (% of income per capita) 193.5 158.4 149.0 132.8

2. Historical data: Dealing with Construction Permits in Bhutan

3. Dealing with Construction Permits sub indicators in Bhutan over the past 4 years

18


22/74

4. Overview of the steps to Building a Warehouse in Bhutan

It requires 25 procedures, takes 183 days, and costs 132.77 % GNI per capita to build a warehouse in Bhutan.



Request and obtain official site plan1 5 days BTN 100

Purchase building construction application form2 1 day BTN 600

Submit form to architectural section3 90 days no charge

Obtain building permit and request preconstruction

inspection from City Corporation

4 1 day BTN 86,022

Receive pre-construction inspection5 1 day no charge

Request and obtain power connection6 20 days BTN 22,550

Request water connection and inspection7 * 1 day BTN 3,200

Receive inspection of water connections8 * 1 day no charge

Connect to water services9 * 10 days no charge

19


23/74

Receive excavation work inspection10 1 day no charge

Receive foundation work inspection11 1 day no charge

Receive concrete work inspection12 1 day no charge

Receive drainage inspection13 1 day no charge

Receive timber scaffolding inspection14 1 day no charge

Receive sanitary inspection15 1 day no charge

Receive fire inspection16 1 day no charge

Receive structure inspection17 1 day no charge

Receive inspection of the building surroundings18 1 day no charge

Convert temporary electrical connection to permanent19 1 day no charge

Receive electricity inspection20 1 day no charge

Connect to sewage services21 * 15 days BTN 3,000

Connect to phone services22 * 2 days BTN 600

Notify building controller of building completion23 1 day no charge

Receive final inspection and obtain occupancy certificate24 1 day BTN 6,000

Obtain occupancy permit25 44 days no charge

* Takes place simultaneously with another procedure.

20


24/74

Procedure Request and obtain official site plan1

Time to complete: 5 days


Agency: Thimphu City Corporation

Comment: After a fee is paid, the official site plan is obtained from the survey section of the City

Corporation.

Procedure Purchase building construction application form2

Time to complete: 1 day



Comment: BuildCo must purchase the building construction application form from the revenue

section of the City Corporation.

Fee schedule for building construction application:

- Application form: BTN 100

BUILDING A WAREHOUSE

Estimated warehouse value:BTN 11,200,000

City: Thimphu

The table below summarizes the procedures, time, and costs to build a warehouse in Bhutan.

5. Details on Building a Warehouse in Bhutan

21


25/74

- Legal service fee (if required): BTN 500.

Procedure Submit form to architectural section3



Agency: Thimphu City Corporation (Architecture Section)

Comment: During stage 1 of the approval, the company must submit a duly completed form to the

architectural section of the City Corporation, along with the drawing(s), the ownership

certificate, and an official site plan. During stage 2 the architectural section will undergo a

planning check with the structural, electrical, sewerage, and water supply sections.

Although this is an internal process carried out by the municipality, not the company,

BuildCo must follow up to ensure progress. During stage 3, the architectural section

submits the proposal to the Chief (Thrompon) of City Corporation with recommendations

and findings for final approval. As with stage 2, BuildCo must check progress on this

internal municipal process.

Procedure Obtain building permit and request preconstruction inspection from City Corporation4


Cost to complete: BTN 86,022


Comment: BuildCo must collect its building permit or request to receive it by post. A

preconstruction site inspection must be requested in writing.

Fee schedule for preconstruction inspection

- Amenities fee:

-- Residential and institutional building: BTN 30 per sq. m.

-- Commercial and industrial building: BTN 50 per sq. m..

- Scrutiny fee: BTN 3,000 or BTN 16.14 per sq. m. (the greater of).

On starting construction, the company notifies the City Corporation in writing.

Procedure Receive pre-construction inspection5



Agency: Thimphu City Corporation (Building Section)

Comment: On BuildCos request to the City Corporations building section, the building inspector

conducts a site inspection. Thereafter, routine inspections occur every 3 weeks. If the

work is not conducted according to plan, the City Corporation issues a notice to rectify

the process. If the company does not comply with the first notice, the utility company

disconnects service. If the company does not comply with the third notice, the structure

will be demolished (before a building inspector, engineer, architect, surveyor, and police

personnel).

Procedure Request and obtain power connection6

22


26/74



Agency: Bhutan Power Corporation Limited

Comment: An application must be submitted to the Revenue Section of the Bhutan Power

Corporation, requesting a power connection. In 3 days, the company must render certain

documents: test report of internal wiring, land ownership certificate, and design and

architect clearance from the City Corporation. In another 2 weeks, the utility provides

meter and power connection.

Procedure Request water connection and inspection7




Comment: To obtain a water connection, BuildCo must submit an application to the building section

of the City Corporation and pay a connection fee of BTN 3,200 for a 3/2'' pipe to theRevenue Section of the water company. All connections must be pre-verifed to check

whether they comply with water and sanitation rules.

Procedure Receive inspection of water connections8




Comment: All connections must be pre-verified to check whether they comply with water and

sanitation rules. The wait time is about 79 days.

Procedure Connect to water services9




Comment:

Procedure Receive excavation work inspection10




23


27/74

Comment: Excavation work is inspected about 3 weeks after the previous inspection. Thus, Buildco

does not have to request an inspection. Moreover, BuildCo does not need to stop work

during inspection. However, it must provide the inspector with transportation to the site.

Procedure Receive foundation work inspection11




Comment: Foundation work is inspected about 3 weeks after the previous inspection. Thus, BuildCo


during the inspection. However, it must provide the inspector with transportation to the

site.

Procedure Receive concrete work inspection12




Comment: Concrete work is inspected about 3 weeks after the previous inspection. Thus, BuildCo



site.

Procedure Receive drainage inspection13




Comment: Drainage work is inspected about 3 weeks after the previous inspection. Thus, BuildCo

does not have to request an inspection. Moreover, BuildCo Company does not need to

stop work during the inspection. However, it must provide the inspector with

transportation to the site.

Procedure Receive timber scaffolding inspection14




Comment: Timber scaffolding is inspected about 3 weeks after the previous inspection. Thus,

BuildCo does not have to request an inspection. Moreover, BuildCo does not need to stop

work during the inspection. However, it must provide the inspector with transportation to

the site.

Procedure Receive sanitary inspection15

24


28/74




Comment: Sanitary conditions are inspected about 3 weeks after the previous inspection.

Procedure Receive fire inspection16




Comment: Fire conditions are inspected about 3 weeks after the previous inspection. Thus, BuildCo



site.

Procedure Receive structure inspection17




Comment:

Procedure Receive inspection of the building surroundings18




Comment:

Procedure Convert temporary electrical connection to permanent19




Comment: To obtain a permanent electrical connection, when the final inspection is completed,

BuildCo must obtain a clearance letter from the City Corporation along with the test

report of internal wiring, the land ownership certificate, and the design and architect

clearance. The connection can be obtained in a day.

25


29/74

Procedure Receive electricity inspection20



Agency: Bhutan Power Corporation Limited

Comment: To receive electrical inspection, the power supply company usually verifies the site tocheck the capacity of the existing load to find out if an additional load can be provided.

Procedure Connect to sewage services21



Agency: Thimphu City Corporation (Sewerage Section)

Comment: To obtain sewage services, BuildCo submits an application to the sewerage section of the

City Corporation with a copy of the plan and a connection fee of BTN 3,000. Theconnection is made in about 2 weeks.

Procedure Connect to phone services22



Agency: Bhutan Telecom Limited

Comment: To obtain a phone line, BuildCo submits the application form duly filled and signed. A

feasibility study is conducted by the service section of Bhutan Telecom. If feasible,

BuildCo pays connection charges.

Procedure Notify building controller of building completion23




Comment: A written confirmation, stating that construction is completed, is issued to the building

controller.

Procedure Receive final inspection and obtain occupancy certificate24



Agency: Thimphu City Corporation, Environmental Commission, and Bhutan Telecom Limited

Comment: When the construction (including utilities connections) is completed, BuildCo must notify

the City Corporation. Subsequently, the site will be inspected by a team (architect,

26


30/74

engineer, surveyor, the Corporations building inspector, and representatives of electrical,

plumbing, and sanitation agencies). The environmental commission and the telephone

company are also informed and asked to join the team, if necessary. If the team deems the

construction completed to agreed standard and plans, it recommends the issuance of an

occupancy certificate. Otherwise, they ask BuildCo to remedy the deficiencies.

Procedure Obtain occupancy permit25




Comment:

27


31/74

28


32/74

1. Benchmarking Registering Property Regulations

Bhutan is ranked 48 overall for Registering Property.

Ranking of Bhutan in Registering Property - Compared to good practice and selected economies:

29


33/74

Procedures

(number)


property

value)

New Zealand 2

Norway 1

Saudi Arabia 0.0

Good Practice

Economies

Bhutan 5 64 0.0

Selected Economy

Af hanistan 9 250 5.0

Ban ladesh 8 245 6.6

India 5 44 7.4

Maldives 6 57 16.9

Ne al 3 5 4.8

Pakistan 6 50 9.2


The following table shows Registering Property data for Bhutan compared to good practice and comparator economies:

30


34/74

Registering Property data Doing Business

2008

Doing Business

2009

Doing Business

2010

Doing Business

2011

Rank .. .. 41 48


Time (days) 64 64 64 64

Cost (% of property value) 0.0 0.0 0.0 0.0

2. Historical data: Registering Property in Bhutan

3. Registering Property sub indicators in Bhutan over the past 4 years

31


35/74

4. Overview of the steps to Registering Property in Bhutan

It requires 5 procedures, takes 64 days, and costs 0.00 % of property value to register the property in Bhutan.



File at the District Court of Thimphu for verdict date hearing1 1 day BTN 100 (forms) +BTN 75 (legal

stamps)

Another hearing is conducted with the parties at the court2 30 days no cost

Final hearing is conducted with the parties at the court3 1 day no cost

The buyer applies to the Department of Survey & Land

Records for the transfer of the names in the Registry and

issuance of ownership certificate/documents

4 2 days BTN 30 (registration

fee)

Land ownership certificate is received from the Departmentof Survey and Land Record

5 30 days (already paid inprocedure 4)

32


36/74

Procedure File at the District Court of Thimphu for verdict date hearing1


Cost to complete: BTN 100 (forms) + BTN 75 (legal stamps)

Agency: District Court

Comment: Parties purchase the prescribed legal form, fill it, sign and file it at the District Court of

Thimphu for verdict date hearing, enclosing sale deed drawn between the parties.

The form may be bought at the District Office or the agents before filing. The sale deed

drawn up by the parties is enclosed, with no need of notary or witness of official for the deed.

A miscellaneous hearing is conducted by the Chief Judge to find out whether the documentsare in order and the transaction is according to Land Act and Govt. Policy. The case file is

handed over to the concerned Bench Clerk for further verification. Both the parties are asked

to report for the hearing, usually that day, and the deadline is announced. Since 2006, if

parties do not show up within a month, the case is cancelled and the parties have to start the

process again.

In the interim period, the Court would conduct investigation with the village headman of the

area, relevant ministry, Census Division and land record Division.

* Until 2005, it was common practice to hire the services of a legal consultant or jabmi to

conduct the process on behalf of the parties. However, in 2005 the professional licenses of all

jabmis were revoked and they were not allowed to practice. Hence, the process can no longer

be conducted with their assistance and the costs noted here are only the official fees, minus the

STANDARDIZED PROPERTYProperty Value: BTN 4,597,242.86

City: Thimphu

This topic examines the steps, time, and cost involved in registering property in Bhutan.

5. Details on Registering Property in Bhutan

33


37/74

would-be legal fees.

Bhutan added two more district courts and cases are heard much more quickly than in the past,

sometimes with no time to wait in between filing and the first hearing.

Procedure Another hearing is conducted with the parties at the court2


Cost to complete: no cost


Comment: At the hearing, the outcomes of the investigation with the relevant people are announced. If

the outcome is positive, the final judgment is delivered. It is mandatory to have a 30-day

waiting period between this and the previous hearing to ensure the parties' certainty in their

decision to undertake the transaction.

Procedure Final hearing is conducted with the parties at the court3


Cost to complete: no cost


Comment: The final hearing is conducted, and the verdict read between the parties and individual copies

given.

Procedure The buyer applies to the Department of Survey & Land Records for the transfer of thenames in the Registry and issuance of ownership certificate/documents

4


Cost to complete: BTN 30 (registration fee)

Agency: Land Commission Secretariat

Comment: After the verdict is received, the buyer is required to file a petition to the Department of

Survey & Land Records along with the copy of the Court verdict for transfer of the names in

the Registry and issuance of ownership certificate/documents. The Department of Survey &

Land Records verifies the census record of the buyer at the Census department to find whether

he is a genuine Bhutanese or not.

Procedure Land ownership certificate is received from the Department of Survey and Land Record5


Cost to complete: (already paid in procedure 4)

Agency: Land Commission Secretariat

Comment: The ownership certificate guarantees all legal rights to the owner.

34


38/74

35


39/74

1. Benchmarking Getting Credit Regulations

Bhutan is ranked 176 overall for Getting Credit.

Ranking of Bhutan in Getting Credit - Compared to good practice and selected economies:

36


40/74

Strength of

legal rights

index (0-10)

Depth of

credit

information

index (0-6)

Public

registry

coverage (%

of adults)

Private

bureau

coverage (%

of adults)

New Zealand 100.0

Portugal 67.1

Singapore 10

United Kingdom 6

Good Practice

Economies

Bhutan 2 0 0.0 0.0

Selected Economy

Af hanistan 6 0 0.0 0.0

Ban ladesh 7 2 0.6 0.0

India 8 4 0.0 10.0

Maldives 4 0 0.0 0.0

Ne al 6 2 0.0 0.3

Pakistan 6 4 5.8 1.4


The following table shows Getting Credit data for Bhutan compared to good practice and comparator economies:

37


41/74

Getting Credit data Doing Business

2008

Doing Business

2009

Doing Business

2010

Doing Business

2011

Rank .. .. 176 176

Strength of legal rights index (0-10) 2 2 2 2

Depth of credit information index (0-6) 0 0 0 0

Private bureau coverage (% of adults) 0.0 0.0 0.0 0.0

Public registry coverage (% of adults) 0.0 0.0 0.0 0.0

2. Historical data: Getting Credit in Bhutan

3. Getting Credit sub indicators in Bhutan over the past 4 years

38


42/74

4. Details on Getting Credit in Bhutan

The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit

registries in Bhutan.

Getting Credit Indicators (2010) Indicator

Private credit

bureau

Public credit

registry0Private bureau coverage (% of adults)

Are data on both firms and individuals distributed? 0No No

Are both positive and negative data distributed? 0No No

Does the registry distribute credit information from retailers, trade

creditors or utility companies as well as financial institutions?

0No No

Are more than 2 years of historical credit information distributed? 0No No

Is data on all loans below 1% of income per capita distributed? 0No No

Is it guaranteed by law that borrowers can inspect their data in the

largest credit registry?

0No No

Coverage 0.00.0

Number of individuals 0 0

Number of firms 0 0

Number of individuals 0 0

Number of firms 0 0

39


43/74

2Strength of legal rights index (0-10)

Can any business use movable assets as collateral while keeping possession of the assets; and any financial

institution accept such assets as collateral ?

Yes

Does the law allow businesses to grant a non possessory security right in a single category of movable assets,

without requiring a specific description of collateral?

No

Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without

requiring a specific description of collateral?

No

May a security right extend to future or after-acquired assets, and may it extend automatically to the products,

proceeds or replacements of the original assets ?

No

Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations

and debts can be secured by stating a maximum amount rather than a specific amount between the parties ?

No

Is a collateral registry in operation, that is unified geographically and by asset type, as well as indexed by the

grantor's name of a security right ?

No

Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? No

Do secured creditors have absolute priority to their collateral in bankruptcy procedures? No

During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? No

Does the law authorize parties to agree on out of court enforcement? Yes

40


44/74


45/74

1. Benchmarking Protecting Investors Regulations

Bhutan is ranked 132 overall for Protecting Investors.

Ranking of Bhutan in Protecting Investors - Compared to good practice and selected economies:

42


46/74


47/74

Protecting Investors data Doing Business

2008

Doing Business

2009

Doing Business

2010

Doing Business

2011

Rank .. .. 131 132

Strength of investor protection index (0-10) 4.0 4.0 4.0 4.0

2. Historical data: Protecting Investors in Bhutan

3. The following graph illustrates the Protecting Investors index in Bhutan compared to best practice

and selected Economies:

9.

7

6.

7

6.

3

6.

0

5.

3

5.

3

4.0

1.

0

NewZe

aland

Banglad

esh

Pakis

tanIn

dia

Mald

ives

Nepal

Bhuta

n

Afghanist

an

Note: The higher the score, the greater the investor protection.

44


48/74

The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are

calculated in Bhutan.

4. Details on Protecting Investors in Bhutan

Protecting Investors Data (2010) Indicator

Extent of disclosure index (0-10) 5

What corporate body provides legally sufficient approval for the transaction?2

Whether immediate disclosure of the transaction to the public and/or shareholders is

required?

0

Whether disclosure of the transaction in published periodic filings (annual reports) is

required?

1

Whether disclosure of the conflict of interest by Mr. James to the board of directors is

required?

1

Whether an external body must review the terms of the transaction before it takes place?1

Extent of director liability index (0-10) 3

Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller

transaction causes to the company?

0

Whether shareholders can hold the approving body (the CEO or board of directors) liable for

the damage that the Buyer-Seller transaction causes to the company?

1

Whether a court can void the transaction upon a successful claim by a shareholder plaintiff?1

Whether Mr. James pays damages for the harm caused to the company upon a successful

claim by the shareholder plaintiff?

0

45


49/74

Whether Mr. James repays profits made from the transaction upon a successful claim by the

shareholder plaintiff?

0

Whether fines and imprisonment can be applied against Mr. James?0

Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller

transaction causes to the company?

1

Ease of shareholder suits index (0-10) 4

Whether the plaintiff can obtain any documents from the defendant and witnesses during

trial?

0

Whether the plaintiff can directly question the defendant and witnesses during trial?1

Whether the plaintiff can request categories of documents from the defendant without

identifying specific ones?

0

Whether shareholders owning 10% or less of Buyer's shares can request an inspector to

investigate the transaction?

1

Whether the level of proof required for civil suits is lower than that of criminal cases?1

Whether shareholders owning 10% or less of Buyer's shares can inspect transaction

documents before filing suit?

1

Strength of investor protection index (0-10)4.0

46


50/74

47


51/74

1. Benchmarking Paying Taxes Regulations

Bhutan is ranked 94 overall for Paying Taxes.

Ranking of Bhutan in Paying Taxes - Compared to good practice and selected economies:

48


52/74

Payments

(number per

year)

Time (hours

per year)

Total tax rate

(% profit)

Maldives 3 0

Timor-Leste 0.2

Good Practice

Economies

Bhutan 18 274 40.6

Selected Economy


Ban ladesh 21 302 35.0

India 56 258 63.3

Maldives 3 0 9.3

Ne al 34 338 38.2

Pakistan 47 560 31.6


The following table shows Paying Taxes data for Bhutan compared to good practice and comparator economies:

49


53/74

Paying Taxes data Doing Business

2008

Doing Business

2009

Doing Business

2010

Doing Business

2011

Rank .. .. 88 94

Total tax rate (% profit) 40.6 40.6 40.6 40.6

Payments (number per year) 19 18 18 18

Time (hours per year) 274 274 274 274

2. Historical data: Paying Taxes in Bhutan

3. Paying Taxes sub indicators in Bhutan over the past 4 years

50


54/74

The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in

a given year in Bhutan, as well as measures of administrative burden in paying taxes.

4. Details on Paying Taxes in Bhutan

Tax or mandatory

contribution

Payments

(number)

Notes on

Payments

Time

(hours)

Statutory tax

rate

Tax

base

Totaltax rate

(% profit)

Notes on

TTR

per signatureBTN 101Stamp duty

0.10interest

income

5.0%withheld0Tax on interest

0.50fixed fee

(BTN

13,000)

1Vehicle tax

0.80varies from

BTN 700 to

25,000

1Business license

1.10gross salaries1.0%2412Health insurance

contribution

2.90per unitBTN 751Property tax

35.00taxable profit30.0%2502Corporate income tax

Totals 18 274 40.6

51


55/74

52


56/74

1. Benchmarking Trading Across Borders Regulations

Bhutan is ranked 161 overall for Trading Across Borders.

Ranking of Bhutan in Trading Across Borders - Compared to good practice and selected economies:

53


57/74

Documents to

export

(number)

Time to

export (days)

Cost to

export (US$

per

container)

Documents to

import

(number)

Time to

import (days)

Cost to

import (US$

per

container)

Denmark 5

France 2 2

Malaysia 450

Singapore 4 439

Good Practice

Economies

Bhutan 8 38 1352 11 38 2665

Selected Economy

Af hanistan 12 74 3865 11 77 3830

Ban ladesh 6 25 985 8 31 1390

India 8 17 1055 9 20 1025

Maldives 8 21 1550 9 22 1526

Ne al 9 41 1960 10 35 2095

Pakistan 9 21 611 8 18 680


The following table shows Trading Across Borders data for Bhutan compared to good practice and comparator economies:

54


58/74


59/74

56


60/74

These tables list the procedures necessary to import and export a standardized cargo of goods in Bhutan. The documents

required to export and import the goods are also shown.

4. Details on Trading Across Borders in Bhutan

Nature of Export Procedures (2010) Duration (days) US$ Cost

Documents preparation 16 110

Customs clearance and technical control 3 180

Ports and terminal handling 6 350

Inland transportation and handling 13 712

Totals 38 1352

Nature of Import Procedures (2010) Duration (days) US$ Cost

Documents preparation 17 110

Customs clearance and technical control 4 180

Ports and terminal handling 6 350

Inland transportation and handling 11 2025

Totals 38 2665

57


61/74

Export

Bill of lading

Certificate of origin

Commercial invoice

Customs export declaration

Export license

Insurance certificate

Packing list

Terminal handling receipts

Import

Bill of lading

Cargo release order

Certificate of origin

Commercial invoice

Customs import declaration

Foreign exchange authorization

Import license

Packing list

Technical standard/health certificate

Terminal handling receipts

Undertaking and insurance certificate

Documents for Export and Import

58


62/74

59


63/74

1. Benchmarking Enforcing Contracts Regulations

Bhutan is ranked 33 overall for Enforcing Contracts.

Ranking of Bhutan in Enforcing Contracts - Compared to good practice and selected economies:

60


64/74

Procedures

(number)


claim)

Bhutan 0.1

Ireland 20

Singapore 150

Good Practice

Economies

Bhutan 47 225 0.1

Selected Economy


Ban ladesh 41 1442 63.3

India 46 1420 39.6

Maldives 41 665 16.5

Ne al 39 735 26.8

Pakistan 47 976 23.8


The following table shows Enforcing Contracts data for Bhutan compared to good practice and comparator economies:

61


65/74


66/74

4. Details on Contract Enforcement in Bhutan

This topic looks at the efficiency of contract enforcement in Bhutan.

IndicatorNature of Procedure (2010)

("Thimphu District Court")Thimphu District CourtCourt information:

Procedures (number) 47

Time (days) 225

Filing and service 20.0

Trial and judgment 90.0

Enforcement of judgment 115.0

Cost (% of claim)* 0.10

Attorney cost (% of claim) 0.0

Court cost (% of claim) 0.1

Enforcement Cost (% of claim) 0.0

* Claim assumed to be equivalent to 200% of income per capita.

63


67/74

64


68/74

1. Benchmarking Closing Business Regulations

Bhutan is ranked 183 overall for Closing a Business.

Ranking of Bhutan in Closing Business - Compared to good practice and selected economies:

65


69/74

Recovery rate

(cents on the

dollar)

Time (years) Cost (% of

estate)

Ireland 0.4

Japan 92.7

Singapore 1

Good Practice

Economies

Bhutan 0.0 no practice no practice

Selected Economy

Af hanistan 0.0 no ractice no ractice

Ban ladesh 25.8 4.0 8

India 16.3 7.0 9

Maldives 18.2 6.7 4

Ne al 24.5 5.0 9

Pakistan 36.5 2.8 4


The following table shows Closing Business data for Bhutan compared to good practice and comparator economies:

66


70/74

Closing a Business data Doing Business

2008

Doing Business

2009

Doing Business

2010

Doing Business

2011

Rank .. .. 183 183

Time (years) no practice no practice no practice no practice

Cost (% of estate) no practice no practice no practice no practice

Recovery rate (cents on the dollar) 0.0 0.0 0.0 0.0

2. Historical data: Closing Business in Bhutan

3. Closing Business sub indicators in Bhutan over the past 4 years

67


71/74

Since 2004Doing Business has been tracking reforms aimed at simplifying business regulations, strengthening property

rights, opening access to credit and enforcing contracts by measuring their impact on 10 indicator sets . * Nearly 1,000reforms have had an impact on these indicators. Doing Business 2011, covering June 2009 to June 2010, reports that 117

economies implemented 216 reforms to make it easier to start a business. 64% of economies measured by Doing Business

have reformed this year, focusing on easing business start-up, lightening the tax burden, simplifying import and export

regulations and improving credit information systems.

Negative Change

Positive Change

EconomyClosingaBusiness

EnforcingContracts

TradingAcrossBor

ders

PayingTaxes

ProtectingInvestors

GettingCredit

RegisteringProperty

DealingwithConstruction

Permits

StartingaBusiness

Kazakhstan

Rwanda

Peru

Vietnam

Cape Verde

Tajikistan

Zambia

Hungary

Grenada

Brunei Darussalam

* For Doing Business 2011 the Employing Workers indicator is not included in the aggregate ease of doing

business ranking.

The top 10 most-improved in Doing Business 2011

68


72/74

Summary of changes to business regulation in top 10 most improved economies inDoing

Business 2011 and selected comparator economies.

Bangladesh Bangladesh made business start-up easier by eliminating the requirement to buy adhesive stamps and

further enhancing the online registration system. Bangladesh reduced the property transfer tax to 6.7%

of the property value.

Brunei Darussalam Brunei Darussalam made starting a business easier by improving efficiency at the company registrar

and implementing an electronic system for name searches. Brunei Darussalam reduced the corporate

income tax rate from 23.5% to 22% while also introducing a lower tax rate for small businesses,

ranging from 5.5% to 11%. The introduction of an electronic customs system in Brunei Darussalam

made trading easier.

Cape Verde Cape Verde made start-up easier by eliminating the need for a municipal inspection before a business

egins operations and computerizing the system for delivering the municipal license. Cape Verde eased

property registration by switching from fees based on a percentage of the property value to lower fixed

rates. Cape Verde abolished the stamp duties on sales and checks.

Grenada Grenada eased business start-up by transferring responsibility for the commercial registry from the

courts to the civil administration. The appointment of a registrar focusing only on property cut the time

needed to transfer property in Grenada by almost half. Grenadas customs administration made trading

faster by simplifying procedures, reducing inspections, improving staff training and enhancing

communication with users.

Hungary Hungary implemented a time limit for the issuance of building permits. Hungary reduced the property

registration fee by 6% of the property value. Hungary simplified taxes and tax bases. Amendments to

Hungarys bankruptcy law encourage insolvent companies to consider reaching agreements with

creditors out of court so as to avoid bankruptcy.

India India eased business start-up by establishing an online VAT registration system and replacing the

physical stamp previously required with an online version. India reduced the administrative burden o

paying taxes by abolishing the fringe benefit tax and improving electronic payment.

Kazakhstan Kazakhstan eased business start-up by reducing the minimum capital requirement to 100 tenge ($0.70)

and eliminating the need to have the memorandum of association and company charter notarized.

Kazakhstan made dealing with construction permits easier by implementing a one-stop shop related to

technical conditions for utilities. Kazakhstan strengthened investor protections by requiring greater

corporate disclosure in company annual reports. Kazakhstan speeded up trade through efforts to

modernize customs, including implementation of a risk management system and improvements in

customs automation.

Maldives Maldives now allows registered companies to own land as long as all company shares are owned by

Maldivians.

Pakistan Pakistan made registering property more expensive by doubling the capital value tax to 4%. Pakistan

reduced the time to export by improving electronic communication between the Karachi Port

authorities and the private terminals, which have also boosted efficiency by introducing new

equipment.

Peru Peru eased business start-up by simplifying the requirements for operating licenses and creating an

online one-stop shop for business registration. Peru streamlined construction permitting by

implementing administrative

reforms. Peru introduced fast-track procedures at the land registry, cutting by half the time needed to

register property. Peru made trading easier by implementing a new web-based electronic data

interchange system, risk-based inspections and payment deferrals.

Rwanda Rwanda made dealing with construction permits easier by passing new building regulations at the end

of April 2010 and implementing new time limits for the issuance of various permits. Rwanda enhanced

access to credit by allowing borrowers the right to inspect their own credit report and mandating that

loans of all sizes be reported to the central banks public credit registry. Rwanda reduced the number o

trade documents required and enhanced its joint border management procedures with Uganda and other

neighbors, leading to an improvement in the trade logistics environment.

69


73/74


74/74