Starting a business in UAE

It takes few procedures for business setup in UAE, 21 procedures to deal with a trade license spanning 62 days in the UAE, according to the latest World Bank report on business benchmarking.

In comparison, it requires just two procedures and two days to setup a business in Australia – the best in the world, said Doing Business 2008, being released today by the World Bank – an advance copy of which was obtained by Gulf News.

However, issuance of a trade license in itself does not take more than 10 to 15 days, investment advisors say.

“Generally, it takes 9-11 steps and about 15 days to set up a business in the UAE. If you take the labour permission and recruitment, then you can add 20 more days, that’s all. It may not take 62 days,” Raju Menon, managing partner of Morison Menon, investment advisors.

Traders have to process eight documents in 13 days to import goods and nine sets of documents in 13 days to export goods in and out of the UAE.

Singapore has the fastest turnaround period of just three days to handle a container of import shipment – from clearing the paperwork, clear the container from the port to transfer to company warehouse and unpacking. The same is done in 20 days in Saudi Arabia, 38 days in Lebanon and 101 days in Iraq – the report says.

Traders shell out $462 to clear a container for either importing or exporting goods through the UAE ports while the same costs $367 in Singapore, $758 in Saudi Arabia, $935 in Kuwait, $1,900 in Syria and $3,400 in Iraq.

It takes on an average of only 12 hours to pay taxes or fees in the UAE – the least time in the world – compared to 62 hours in Oman, 79 hours in Saudi Arabia, 180 hours in Lebanon and 711 hours in Egypt.

“While the business environment is improving worldwide, entrepreneurs in the Middle East still face major challenges,” Simeon Djankov, lead author of the report, said in a statement.

These are in such areas as minority shareholder protections, court efficiency, and insolvency procedures and laws.”

For example, on one measure of investor protections, the ease of shareholder suits, Iran scores zero out of 10, while Morocco scores 1 and the UAE 2.

In Lebanon, resolving a commercial dispute in the courts take 721 days on average, and in the UAE the process involves 50 procedures from the moment the plaintiff files a lawsuit in court until the moment of payment.

However, there are certain positive indicators that would make the government regulators happy.

The report says land registry in the UAE comes with one of the lowest numbers of procedures.
It takes only three procedures and just six days to register a plot of land in the UAE compared to 14 procedures in Algeria and 193 days in Egypt to register a property.

Property registry costs 28.1 percent of the property value in Syria, 10 percent in Jordan, 3 percent in Oman, 2 percent in the UAE and is nearly free in Saudi Arabia, according to the report.

The UAE has one of the lowest recovery rates in bankruptcy, at 10.1 per cent compared to 33.6 per cent in Kuwait, 30.8 percent in Syria, 51.5 percent in Tunisia and 92.6 percent in Japan – the best recovery rate in the world.

Top reformer
Egypt is the top reformer in the world for 2006/07, finds Doing Business 2008—the fifth in an annual series issued by the World Bank and the International Finance Corporation (IFC).

Egypt outpaced other reformers worldwide and in the Middle East and North Africa in making it easier to business setup, with improvements in five of the 10 areas studied by the report, it said.

Egypt cut the minimum capital required to setup a business, from 50,000 Egyptian pounds to just 1,000 and halved the time and cost of start-up. It reduced fees for registering property from 3 percent of the property value to a low, fixed amount. It eased the bureaucracy that builders face in getting construction permits.

Saudi Arabia — the seventh-fastest reformer globally and second-fastest in the region — joined the ranks of the top 25 countries worldwide on the ease of doing business. It had reforms in three of the 10 areas studied.

The country has made starting a business more accessible by eliminating what had been, in U.S. dollar terms, the highest minimum capital requirement in the world.

Saudi Arabia, the runner-up reformer in the region, eliminated the minimum capital requirement of 1,057 per cent of income per capita and reduced the days needed for company start-up from 39 to 15. It launched a commercial credit bureau whose reports include the credit exposure of companies.

The Middle East and North Africa saw 22 reforms in all—and three negative changes—in 11 of its economies. The region ranks fourth in the world—behind Eastern Europe and Central Asia, South Asia, and the OECD high-income countries—on the pace of reform.

“The report finds that equity returns are highest in countries that are reforming the most,” said Michael Klein, World Bank/IFC Vice President for Financial and Private Sector Development.

“Investors are looking for upside potential, and they find it in economies that are reforming — regardless of their starting point,” he added.

Large emerging markets are reforming fast: Egypt, China, India, Vietnam, and Turkey all improved in the ease of doing business. The report also finds that as more countries simplify regulation to make it easier to do business, more entrepreneurs are going into business.

Doing Business in the UAE

1. 11 procedures for business setup in UAE
2. 62 days for business setup in UAE
3. Eight procedures needed for importing goods
4. 13 days needed to clear a container from a port and unpack goods
5. Nine procedures and 13 days needed to pack and ship a container
6. $462 needed to ship a container
7. It takes only three procedures and just six days to register a plot of land in the UAE
8. Property registry costs 2 per cent of the property value in the UAE.
9. 10.1 per cent recovery rate in case of bankruptcy – one of the lowest
10. It takes on an average of only 12 hours to pay taxes or fees in the UAE

Source: Doing Business 2008 report, World Bank and IFC

Doing Business Report

1. Doing Business 2008 is the fifth in a series of annual reports investigating the regulations that enhance business activity and those that constrain it.
2. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across the economies.
3. Regulations affecting 10 stages of a business’s life are measured such as: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.

Doing Business 2008 findings
1. Egypt Is World’s Top Reformer of Regulation
2. Saudi Arabia Joins Top 25 on Ease of Doing Business
3. Data in Doing Business 2008 are current as of June 1, 2007.
4. Doing Business 2008 ranks 178 economies on the ease of doing business, including 46 in Sub-Saharan Africa, 31 in Latin America and the Caribbean, 28 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 17 in the Middle East and North Africa and 8 in South Asia—as well as 24 OECD high-income economies as benchmarks.
5. Singapore tops the rankings for the second year running.
6. The others in the top 25 are, in order, New Zealand, USA, Hong Kong (China), Denmark, UK, Canada, Ireland, Australia, Iceland, Norway, Japan, Finland, Sweden, Thailand, Switzerland, Estonia, Georgia, Belgium, Germany, the Netherlands, Latvia, Saudi Arabia, Malaysia, and Austria.
7. The ranking countries in the Middle East and North Africa are Saudi Arabia (23), Israel (29), Kuwait (40), and Oman (49), the UAE (68).