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Moscow Times
September 13, 2005
Business Is Getting 'Easier, Cheaper'
By Anna Smolchenko
Staff Writer

Russia is a far easier place to do business than other developing economies like China or Brazil, according to the World Bank's third annual ranking, to be published Tuesday.

As a place to start up and run a business, Russia ranks 79th of 155 countries, just below Romania but right above European Union member Greece.

Usual suspects New Zealand, Singapore and the United States occupy the top three spots, and ex-Soviet tiger economies Lithuania and Estonia hold spots No. 15 and No. 16, respectively.

There is no one-to-one comparison with last year's study, as rankings were not assigned to all countries last year.

The World Bank offers measured praise to the Russian government, saying it needed to simplify the issuing of licenses and property registration, as well as revise upward the retirement age for women.

"The pace of reforms in Russia has slowed down recently, but it still moves faster than its main emerging-markets competitors," said Simeon Djankov, a senior economist at the World Bank and one of the report's authors.

Djankov said Russia compared favorably to other major developing economies such as China, which was No. 91; India, No. 116; and Brazil, No. 119.

Uzbekistan is the study's lowest ranking former Soviet republic, at No. 138, with the Democratic Republic of Congo bringing up the rear at No. 155.

Although Russia still falls far short of leading liberal economies like Australia or Hong Kong, the government has taken steps to make doing business easier for the second consecutive year, the World Bank says in its report.

For example, it has become somewhat easier and cheaper to start a business in Russia, the study found -- 33 days and 8 procedures this year, as opposed to 36 days and 9 procedures last year. In the United States, by contrast, it takes 5 days and 5 procedures.

Registering property in Russia is tedious -- but at least it's cheap. Russia ranks among the top 10 countries with the lowest cost to register real estate, at 0.4 percent of the property's value. But it now takes 52 days to complete the process, a sharp increase from 37 days last year. In New Zealand, a new property-owner cuts through the red tape in two days.

In terms of getting licenses, Russia ranks only three spots from the bottom.

The World Bank has found that a Russian entrepreneur wanting to build a two-story warehouse covering 1,300 square meters would have to complete 22 procedures, taking 528 days. Only businessmen in Iran and Ivory Coast would need more time, the study reported.

The central government -- and not regional authorities -- should be charged with issuing licenses to speed up the procedure, said Djankov.

The World Bank study partially dovetails with a study published last week by Canada's Fraser Institute, which placed Russia 115th out of 127 countries in terms of economic freedom, on a par with Togo and Rwanda. In the Fraser study's index of red tape facing businesses, Russia ranked No. 95.

Nevertheless, the World Bank places Russia among the top ten countries in terms of ease of hiring new employees, along with Switzerland and Namibia. At the same time, it became more difficult to fire workers, the report finds.

The World Bank advises the government to make the retirement age equal for men and women. In

Russia, where women retire at 55 and men at 60, "business suffers as it pays high pension contributions and loses many productive workers early," the study says. As a result, women also see their career opportunities suffer, the World Bank says.

In other areas, the World Bank commends Russia for eliminating obstacles to sharing credit information; speeding up customs declarations for imports; and simplifying taxation for a third year in a row.

Last year Russia was the "second fastest reformer" among CIS countries after Georgia, the World Bank says.

Nikolai Ostarkov, the head of executive committee at Delovaya Rossiya, a lobby group for mid-sized businesses, took issue with some of the report's findings.

Even if the tax burden has become lighter, tax administration is becoming worse, he said. The tax authorities are "moving into" businesses, he said, taking over their own rooms while they conduct tax checks.

"If in other countries one accountant can work with 50 companies, here several accountants are needed for one company," he said.