Cost of Doing Business in the Pacific: Enabling the Local Economy

Pacific Local Government ForumPort Moresby, PNG20-21 May 2014

Henry SandaySuva, Fijihesanday@gmail.com

Outline of Presentation

• Motivation• Power & Influence of Local Governments • Doing Business Rankings• Regulations for Starting a Business

Formal sectorInformal sector

• Key Issues• Suggested Way Forward

Motivation• Recurring Donor/Govt concern on difficulties with doing business• PLGF 2010: LG economic strategies to provide for ”enabling

conducive business environments through effective planning, regulation and service delivery”

• PIPSO (2012): “high level of bureaucracy in companies registration and local government business licences”

• PIC Development Plans: commitments to create an enabling national policy climate supportive of private sector-led growth

• World Bank: deteriorating DB regulatory rankings since 2006

• PROBLEM? Rising cost of domestic bureaucracy at LG level

Power & Influence of Local Governments

“The firestorm in the Middle East was sparked by a single act of protest: Muhammad Bouazizi, a young Tunisian fruit seller, set himself on fire when municipal inspectors made it impossible for him to eke out a modest living. He later died of his injuries.”

Source: The Economist, 26 February 2011, p.60

Doing Business Rankings, 2006 & 2014Source: World Bank (2014) www.doingbusiness.org

2006 (of 175)Fiji 29

Samoa 36Tonga 46PNG 53

Vanuatu 54Palau 57

Kiribati 58Sol Is 61RMI 86

FSM 105

2014 (of 189)Tonga 46Samoa 61

Fiji 62Vanuatu 74

Sol Is 97Palau 100PNG 113RMI 114

Kiribati 122FSM 156

Performance of PICs in Starting a Business, 2014Source: World Bank Doing Business 2014, www.doingbusiness.org

Ranking2010/2014

No. of Proce-Dures

Days to Start a

Business

Cost (% income/capita)

Business Licensing Reforms since 2006Authority Days Fees

Samoa 19/33 4 9 9.6 Min of Revenue 4 WST500(US$215)

+1: 2010

Tonga 31/42 4 16 7.7 Min of Labour, Comm&Industry

7 TOP120(US$65)

+2: 2009 & 2012

RMI 36/56 5 17 12.8 Majuro LG 7 US$150-5k Nil

Sol Is 111/82 7 9 47.5 Honiara City Council

1-3 SB$2.7k(US$360)

+1: 2012

PNG 77/101 6 53 13.0 NCDC 20 PGK50(US$25)

Nil

FSM 81/106 7 16 144.4 Municipality 2 US$100 Nil

Vanuatu 110/126 8 35 46.2 Dept of Customs & Inland Rev

1 VT20k-1m(US$8,500)

+1: 2012

Palau 106/129 8 28 3.8 Revenue Dept & Koror State

3-5 US$50 Nil

Fiji 107/147 11 59 23.1 Suva City Council

7-14 FJ$500(US$270)

-2: 2012 & 2013

Kiribati 120/156 7 31 22.7 Betio Town Council

7-14 AU$600(US$585)

Nil

Reforms to Starting a BusinessSource: World Bank Doing Business 2014, www.doingbusiness.org

PIC Year Reform Details

Samoa 2010 Removed minimum capital requirement & simplified other procedures

Tonga 2009

2012

New license regulations reforms

New electronic system at the registry

Sol Is 2012 New online registration process

Vanuatu 2012 Reduced time required for company registration at VFSC & issued provisional licenses at the Dept. of Customs

Fiji 2012

2013

Added requirement for company registration: Obtain a Tax Identification NumberAdded requirements for new/renewed Business Licence: Obtain Fire & OHS compliance certificates

Starting a Business, Suva, FIJI, 2014(Source: Doing Business 2014 Report, www.doingbusiness.org)

Procedure Authority Days Cost (FJ$)

1. Name reservation Companies Office 8 $5.65

2. Due compliance Private Lawyer 3 $1,200

3. Name registration* Companies Office 21 $150-200

4. Tax registration* FRCA Tax Office 7-14 FOC

5. Premises inspection* FRCA Tax Office 1 FOC

6. Submit TIN (Tax ID No.) Companies Office 1 FOC

7. Training levy National Training Council 3 FOC

8. Fire safety** National Fire Authority 7-14 $50-100

9. Occupational health & safety Ministry of Labour 3 $90

10. Business licence Suva City Council 7-14 300

11. Social security** National Provident Fund 7-14 FOCTOTAL (11 procedures) 59 23.1% inc/capita

* Simultaneous procedures

SCC Business Licence Requirements, 2014Source: www.suvacity.org

1. Completed application form: SCC, Victoria Parade2. Company registration certificate: Companies Office, Victoria Parade3. Investment Fiji certificate (if foreign-owned): Investment Fiji, Victoria Parade4. Tax registration certificate: FRCA, Queen Elizabeth Drive, Nasese5. Health licence (if applicable): Min. of Health, Toorak 6. Name, contacts & photos of Directors/Owners: Applicant7. Landlord’s consent letter (if renting): Applicant & Landlord8. Liquor licence (if applicable): Min. of Justice, Victoria Parade9. Fire compliance certificate: National Fire Authority, Argo St, Walu Bay10. Occupational health & safety certificate: Min. of Labour, Civic House (behind SCC)11. Building completion certificate: SCC, Victoria Parade12. Environment certificate (if applicable): Environment Dept, Raojibhai Patel St 13. Processing fees ($23.00): SCC, Victoria Parade

Applicants to submit completed form + 2 copies of each licence & certificate

Comparison of Licensing Categories & FeesSuva City: 390 licence categories; fees FJD4.61 - FJD4,603.50 Lae City: 49 categories; 107 licences; fees PGK106 – PGK5,000 (Source: Lae Chamber)Honiara City: 172 categories; fees SBD116 - SBD116,000 (Source: Honiara City Council)

SCC Hawkers Licence Requirements, 2014Source: www.suvacity.org

APPLICATION FOR HAWKERS / STREET TRADERS PERMIT UNDERTHE SUVA AREA [HAWKERS AND STREET TRADERS] BY – LAW, 1997

Name of Applicant: Mr / Mrs / Miss: _____________________________________________Fathers Name: _______________________________________________________________Occupation of Applicant: _______________________________________________________Parents Occupation: ___________________________________________________________Residential Address H/ N ____________________________ Street / Road: ________________Ward: ___________________________________________ (For Suva Residents)City or Town: _____________________________________Postal Address: _______________________________________________________________Phone Number: ___________________________________Last License Number: ______________________________Expiry Date: ___________________Do you or any members of your family operate any stall in Suva Market, Curio And or Handicraft Centre or a street trader’s pitch or any other Hawkers LicenseIf yes, Please give details________________________________________________________________________________Type Of Goods/ Products to be sold : __________________________________________________________________________________________________________________________________WITNESS:NAME: ______________________________________ADDRESS: ____________________________________ PHONE CONTACT: ___________________SIGNATURE: _________________________{SIGNATURE OF APPLICANT}__________________________ {DATE}___________________REQUIREMENTS**2 Passport photo **2 copies of suppliers letter **2 copies of TIN Registration letter**2 copies of HEALTH License **2 copies of consent Letter

FOR OFFICIAL USE ONLYA. Business License SectionNew Application / Renewal: _________________________________________________________________Method of Business Operation: Street Trader: Hand cart or Table / Hawker: in box, Basket or tray, Carried or borne by hawker in box, Bicycle, motor Vehicle, or other type of conveyance herein specified_____________Location of Business Operation: ______________________________________________________________B. Administration DepartmentComments by Enforcement Officer: ___________________________________________________________________________________________________________________________________________________Comments By Admin Department (if applicable)_________________________________________________________________________________________________________________________________________Approved/Not Approved Director Admin/Operation:______________________________________________C. Health Department Health requirements checked and remarks below:________________________________________________________________________________________Date: _____________ Designation: ___________________ Signature: _______________________________Approved / Not Approved Director Health: _____________________________________________________D. Engineering Department Requirements checked and remarks below:________________________________________________________________________________________Date: _____________ Designation: _______________ Signature: ___________________________________Approved / Not Approved Director Engineers: ___________________________________________________E. Finance DepartmentRemarks of Business License Officer: ________________________________________________________________________________________________________________________________________Approved / Not Approved Director Finance: ____________________________________

Key Issues• Capacity constraints & internal/external delays• National vs. Local Government regulations• DB rankings important but actual reforms to

improve regulatory services more important• Excessive red tape at LG level• LG-Regulator & LG-Private Sector disconnects• New fees & regulations without consultation• Non-availability /different forms of authorities• Informal sector issues

Suggested Way Forward1. LGs: to be empowered & adequately resourced

One-stop information centres Standardised application forms

2. Regulatory reforms: Local/National Govt consistency Combined regulatory functions & extended times

3. Informal sector: need voice & empowerment4. LG Dialogue with Regulators, Formal/Informal sectors

Partners: LGs, LGA, National Govts, CLGF Pacific & Donors

The high cost of doing business, in both the formal and informal sectors, is an area requiring attention, not only at National Government level but also at LOCAL GOVERNMENT level.

Vinaka vakalevu