Improving Ease of Doing

Business
Office of the Prime Minister
December 26, 2018
 What is Ease of Doing Business Report?
Ease of Doing Business Report measures number of procedures with time & cost across 10 indicators
1. Registering a business 2. Construction permit
Procedure, cost, time &
Getting construction permit to
minimum paid up capital to
set up a PLC build a warehouse, quality
control & safety mechanisms
10. Resolving insolvency

Time, cost, outcome and recovery rate & 3. Getting electricity

strength of the legal framework for insolvency
Procedures, time and cost to get
electricity & Reliability of supply
9. Enforcing Contract
Time & cost to resolve a
4. Registering Property
commercial dispute & the quality of
judicial processes Procedures, time & cost to
transfer property; quality of the
8. Paying taxes land administration system
Payments, time &total tax rate for a
firm to comply with all tax regulations 5. Getting Credit

7. Trade across boarders Credit information system &

6. Protecting minority right coverage; movable collateral law
Time & cost to export the product of
comparative advantage & import Minority shareholders’
necessary materials rights transactions & 1
corporate governance
Ease of Doing Business ranking places Ethiopia behind
its regional peers

ETHIOPIA RWANDA KEYNA

 Ethiopia currently ranks 159th out of
190 countries globally
Overall doing business rank 159 29 61
 Ethiopia lags an average of 60+ ranks
Starting a Business 167 51 126 behind East African peers; and 130
ranks behind Rwanda
Dealing with Construction Permit 168 106 128
 Rwanda implemented over 50 reforms
Getting Credit 175 3 8 from 2005-2018 across all indicators
placing 29th in the world
Protecting Minority Investors 178 14 11  Currently, it takes 4 days & 4
procedures to register a
Paying Taxes 130 35 91 business in Rwanda while it
takes 11 procedures and 32
Trading Across Borders 154 88 112 days in Ethiopia

60 78 88  Kenya has been working to improve its

Enforcing Contracts business climate since 2014, currently
ranking 61st
Resolving Insolvency 148 58 57

131 68 75  The Doing Business report provides an

Getting Electricity
Registering Property
objective methodology and clear
benchmarking framework to assess and
2
144 2 122
improve countries’ business climate
Several investment climate constraints hamper private
sector development in Ethiopia

Ethiopia Rwanda Ethiopia Rwanda Ethiopia Rwanda

Doing Business No. of No. of
Time Time Cost cost
Indicators Procedures Procedures
Starting a business 11 5 32 days 4 days 52.7% 14.8%

Paying tax 29 8 300 hrs 95 hrs 37.7%

33.2%
Registering Property 7 3 52 days 7 days 6% 0.1%
Dealing with construction permit 13 15 134 days 113 days 14.40%
12%
Trade across boarder 127 days 113 days 347 USD 293 USD

Enforcing contract 530 days 230 days 15.2% 82.70%

Comparing Ethiopia with Rwanda on procedure, time and cost

 It takes 8 times longer to take business license in Ethiopia compared to Rwanda 3
 Paying taxes takes 3 time longer; Registering property takes double the time
 Enforcing contract takes 2 times longer
 Improving Ease of doing business is key in enhancing private
sector development towards national development goals

Improved doing business environment

helps to: Vision 2020
1. Tackle unemployment Placing Ethiopia among the
 3% increase in urban unemployment during the
last 2 years - CSA Ethiopia TOP 100 DB ranking
 When businesses are successful they hire more Countries
people & pay more taxes
2. Improve trade balance Improving investment & business climate will
 12.8 Billion USD negative commodity trade help:
balance in 2016/17 – National Bank  Increase business competitiveness &
 Competitive business environment will foster productivity
value addition and export  Create employment opportunities
3. Improve smallholders productivity & access  Enhance transparency and fight corruption
to market  Formalize businesses
 Little improvement in yield during the past 5 years  Increase tax revenues
 Creating an enabling environment for businesses  Attract foreign direct investment
means more market solutions in agriculture and
agribusiness 4
Dedicated implementation is required from the leadership of
10 institutions

INDICATORS LEAD INSTITUTIONS

1. Starting a Business 1 Ministry of Trade and Industry

2. Dealing with Construction Permit 2 Addis Ababa City Administration

3. Getting Credit 3 National Bank of Ethiopia

4. Protecting Minority Investors 4 Federal Attorney General

5. Paying Taxes 5 Ministry of Revenue

6. Trading Across Borders 6 Customs Commission

7. Enforcing Contracts 7 Federal First Instance Court, Federal Supreme Court

8. Resolving Insolvency 8 Federal Attorney General, Federal High Court

9. Getting Electricity 9 Ethiopian Electric Utility

10. Registering Property 10 Addis Ababa City Administration

5
 Prime Ministers
Office Drive from the highest level of
Policy and Performance government is critical to
Unit
implement ambitious reforms

World Bank group/IFC Ethiopian

Doing Business Reform
Team
Investment
Commission

DB Institutional Champions: Ministers/Agency Leads + Institutional Technical Taskforce +

Sectoral Experts
[from public sector, private sector, associations etc.]

Starting a Dealing with Registering

Protecting Minority
Business Construction Property Getting Credit
Investors
[Ministry of Permits [Addis Ababa [National Bank
[Federal Attorney
Trade and [Addis Ababa City City of Ethiopia]
General]
Industry] Administration] Administration]

Resolving
Insolvency
Trading Across Enforcing
Paying Taxes [Federal Getting Electricity
Boarders Contracts
[Ministry of Attorney [Ethiopian Electric
[Customs [Federal Frist
Revenue] General & Utility]
Commission] Instance Court] 6
Federal High
Court]

Source: Team analysis

 Transparent follow-up system is critical to effectively
monitor implementation of reforms

Monthly Report/meeting:
Prime Ministers  PMO + EIC +
Office Implementing
 Reform dashboard is Reform Lead Ministry/Agency
developed and Ministers/Heads
shared for each
ministry/agency
Bi-weekly
Ethiopian Report/meeting:
Investment  EIC + Implementing
Commission Agency Leads/ Task
Reform Coordinator force
 Signing of reform
agreement Weekly Report:
Implementing  Internal update
institutions of ongoing
Reform Implementers reform
(Ministers/Heads) implementation
Task Force by each task
force 7

Source: Team analysis

Timeline

NOW
LEGEND
REFORM PERIOD

DB 2019 Report launched  PMO to organize onboarding

workshop & send letters/reform  Compilation of DB 2020 reform
Developed draft reform agenda for  DB 2020 Report launched
dashboard to 10 implementing reports and evidences
each implementing agencies institutions

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

 PMO to convene monthly

progress update meeting with
all agencies

 Launch of DB 2020 Reform  Conduct communicative workshop 8

Agenda with stakeholders on on implemented reforms
prioritized indicator*
Starting a Business: Ministry of Trade and Industry

Short term Medium term Long term

Short term Dec. 2018 –
March – Dec. 2019
March 2019 -
March 2019 June 2020

 Eliminate requirements to:

Medium term
 Publish company name on
newspaper
 Have company seal  Automate business registration &
 Present lease agreement/physical licensing
address  Implement use of software for
 Authenticate AoA & MoU printing VAT invoice
 Implement one-stop-business
registration at MoTI & sub-cities
 Reduce number of days to get cash  Implement
Long term harmonized
register machine to 3 days (from 7)
 Streamline licensing & competence compulsory online
requirements business service
 Eliminate the requirement of business (federal and regional)
license renewal or reduce its frequency linked with relevant
government 9
from every year to every 3 - 5 years
agencies
Getting Credit: National Bank of Ethiopia

Short term

 Create a unified secured transactions

legal framework – approve draft Medium term
Movable Properties Security Rights
Proclamation  Introduce & operationalize
 Expand/include MFIs and capital goods collateral registry system
financing companies in the credit (hardware and software)
information system to reach 6% of adult
population

 Expand credit
Long term information system –
considering PPP and
other modalities

10
Paying Taxes: Ministry of Revenue

Short term
Medium term
 Implement e-filing & payment to 25% of VAT
registered businesses  Increase e-tax coverage to 50% of VAT
 Extend e-tax service to other types of taxes registered businesses and other types of
by 25% taxes
 Reduce VAT refund time by 50% (Current  Reduce time to obtain VAT refund by at
ave. 48.7 weeks vs. 8 weeks limit in VAT least 85%
proclamation)
 Change VAT filing & payment to quarterly
for small & medium businesses  Increase coverage of
 Provide all information on website Long term compulsory e-tax to 100%
 Enable payment of tax through banks (cover of VAT registered
at least 25% of tax payers) businesses & other types
of taxes
 Implement a robust tax
administration IT system 11
(SIGTAS)
Trading Across Boarders: Customs Commission

Short term
Medium term

 Pilot Electronic single window system

 Approve & implement draft
regulations/directives on deferred
payment & new customs service
charges
 Implement simplified customs
procedures
 Implement advance ruling on tariffs
 Implement pre-arrival clearance
 Update Customs website -
import/export procedures, laws &
document requirements
 Launch 24/7 service on main dry port
(Mojo & Kaliti), Customs & Djibouti
customs
 Implement the new web based
customs management system
 Implement e-single window & electronic risk management for
export
 Update risk management process for import (Yellow from 50% to
30%; Green 25% to 50% and Red from 25% to 20%)
 Reduce number of check points from 4 to 2 on the Ethio- Djibouti
transit root (implement cargo tracking)
 Implement coordinated inspection & risk management at clearance
 Implement fully integrated e-single window
Long term  Update & Implement risk management process
for import (Yellow from 30% to 20%; Green 50%
to 65% and Red from 20% to 15%)
 Implement risk management system for export 12
to achieve red 10%; Yellow 20% and green 70%
Dealing with Construction Permits: Addis Ababa City
Administration

Short term
Medium term
 Reduce construction permit process time by:
piloting online application, fee collection & follow  Fully implement compulsory online
up; reducing number of days to obtain approval of application, fee collection & follow up
plans & construction permit by 50% (now 30 days) platform
 Reduce time to obtain water and sewerage
connection from Addis Ababa Water Supply and
Sewerage Authority (AWSSA) by 50% (currently at
75 days vs. 30 in Rwanda)
 Revise building directive to include: 1) final  Reduce time to obtain
inspection/quality control after construction, 2) Long term water and sewage
framework for insurance & latent defect liability of connection from AWSSA
all involved professionals by 75%
 Align the inspection process with the risk-based
system
13
Registering Property: Addis Ababa City Administration

Short term
Medium term
 Digitize 50% of title deed records and land
plot maps  Digitize 75% of title deed records and land
 Publish official stats on property plot maps
transactions & land disputes  Pilot online property registration services
 Avail online all information required to  Reduce the number of days for registration
complete property transactions of property and obtain title deed by at least
 Reduce number of days for registration of 75% – eliminate tax clearance requirement
property and obtain title deed by 50%
(currently at 52 days Vs 7 in Rwanda) –
eliminate newspaper publication and 15  Digitize 100% of title deed
Long term records and land plot
days awaiting
 Set statutory time limit (e.g. Mauritius 15 day maps
limit)  Enforce 100% compulsory
online property
registration services
14
Getting Electricity: Ethiopian Electric Utility
Short term
 Avail effective tariffs & changes online
 Reduce documentary requirement on first
application to application form and ID card
 Reduce time of site visit and cost
estimation to 5 calendar days (current
average: 21days)
 Remove 10% deposit requirement
 Reduce the time it takes for connection by
50% (current average: 60 days Vs 15 in
Rwanda) through outsourcing connection
and installation work to private companies
(done in Rwanda, Kenya etc)
Medium term
 Implement compulsory online application
and follow up/tracking to get electricity
 Implement automated tool to measure
frequency & duration of interruption
 Reduce the time it takes for connection by
75%
 Enforce service delivery timeline (Kenya)
 Implement GIS to
Long term eliminate site visit (Kenya)
 Allow for compensation to
customers where outages
exceed a certain cap 15
Protecting Minority Investors: Federal Attorney General

Short term
Medium term
 Develop draft revision of Commercial Code
(Book II) to enhance protection and
participation of minority shareholders
 Develop procedure for evidence rule to
allow access to supporting
documents/discovery by minority investors
 Initiate drafting of consolidated alternative
arbitration, mediation and conciliation law
 Approval of the Commercial Code by the
Council of Ministers and Parliament (and
implementation of reforms)
 Approve and implement consolidated
alternative arbitration, mediation and
conciliation law encompassing substantially
all aspects of alternative dispute settlement

 Position Addis Ababa as

Long term Commercial Arbitration
Hub in Africa

16
Resolving Insolvency: Federal High Court and Federal
Attorney General

Short term
Medium term
 Submit for approval a Commercial Code
draft (Book IV) that enhances bankruptcy  Approval of the Commercial Code by the
procedures (including reorganizing Council of Minister and Parliament (and
procedures; timeframe for resolving implementation of reforms)
insolvency to 1.5 years; allow creditors
participation; recovery rate)

 Reduce time for resolving insolvency from 3

years by half through assigning specialized
bench

17
Enforcing Contracts: Federal First Instance Court:
Federal Supreme Court

Short term
Medium term

 Enact adjournment policy that: a)

sets overall time standards for key
court events in a civil case, b)
regulates the maximum number of
adjournments, and c) limits
adjournment to unforeseen and
exceptional circumstances
(alternative to civil procedure code
revision)
 Implement specialized and
streamlined procedures in
commercial benches (assistant
judges, special secretaries etc)
 Increase the number of commercial
benches and judges
 Implement electronic case
assignment system to reinforce
random process
 Reduce time to settle a commercial case (filling-trial-judgement-
enforcement) by at least 25% (current average: 530 Vs 230 in
Rwanda)
 Online publication of commercial case judgments (start pilot FFIC)
 Develop a robust and comprehensive electronic case management
system for judges and lawyers
 Enact a comprehensive ADR law covering arbitration, mediation &
conciliation (AGto lead drafting)
 Reduce time to settle a commercial case by at
Long term least 50% (current average: 530 Vs 230 in
Rwanda)
 Expand online publication of commercial case
judgments to all levels – FFIC, FHC, FSC)
 Fully automate court process - online complaint 18
lodging, electronic fee payment etc