Economy profile of Iraq – Doing Business 2020 Indicators

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Economy profile of Iraq

Doing Business 2020 Indicators

Comparing Business regulation in 190 Economies

Researched and prepared by: Hala Al Salam

IFPMC – London

Starting a business:

This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city.

To make the data comparable across 190 economies, uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals.

Procedures to legally start and formally operate a company:

For men: company registration by men requires 8 procedures per day, those procedures are any institutional dealings between the company and other parties, whether governmental departments, lawyers, reviews, as well as the procedures of the Real Estate Registration Department in Baghdad and the provinces.

For women: opening a company requires 9 procedures per day.

Time required to complete each procedure (calendar days):

For men: time required for a company registration 26 days.

Although this period considered as ideal, which estimated by lawyers to obtain company licenses in Iraq, the reality indicates that establishing company in Iraq takes way longer, up to 2 – 4 months on average.

For women: it takes 27 days, noting that the reality in Iraq indicates that men and women are equalised in time period for registering commercial companies.

Cost required to complete each procedure (% of income per capita)

The cost includes all official fees and those related to legal or professional services, if required by law.

For men, opening a business in Iraq constitutes 34.2% of income per capita.

The same applies to women: the cost of opening a business is the same as 34.2% of income per capita, which is considered as a discouragement factor for investment, and one of the most important obstacles to empowering women in Iraq.

Dealing with Construction Permits:

This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications,

requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building

quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional

certification requirements.

Procedures to legally build a warehouse:

Number of procedures required to build a private warehouse for companies in construction sector, or develop their facilities varies between 11 and 12 according to the latest releases of 2020 report.

Time required to complete each procedure (calendar days):

It takes 167 days in order to obtain papers required for setting up a warehouse or build a company.

That time period is considered one of the longest time periods in compare to other poorer countries where economic challenges exist such as Afghanistan, Pakistan and Senegal.

Cost required to complete each procedure (% of income per capita):

The cost of construction procedures amounted to 0.3 of per income capita, noting that the cost is calculated as a percentage of the average national income per capita and only official costs are included.

Building quality control index:

This index is based on other 6 indicators:

  • Quality of building regulations.
  • Quality control before construction.
  • Quality control during construction.
  • Quality control after construction.
  • Liability and insurance regimes.
  • Professional certifications.

Iraq got 5.5 points, which is considered as one of the lowest points, compared to the Middle East and North Africa countries, where the percentage is 12.5.

Getting Electricity:

This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity.

Procedures to obtain an electricity connection (number):

The process of getting electricity for a commercial project in Iraq requires 5 procedures, which is a high rate in a country that is considered as an oil state in the Middle east.

Time required to complete each procedure (calendar days):

It takes 51 days to deliver electricity to the commercial project.

Cost required to complete each procedure (% of income per capita):

Cost of obtaining electricity for a commercial enterprise in Iraq is 384.7% of average national income per capita.

Registering Property:

This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights.

Procedures to legally transfer title on immovable property (number):

Number of procedures, legally required, to register property in Iraq is 5 procedures per day.

Time required to complete each procedure (calendar days):

Total number of days required, by law, to register property in Iraq is 51 days.

Cost required to complete each procedure (% of property value):

Percentage of property registration in Iraq is 7.3%.

The cost is calculated as a percentage of property’s value, assuming this value equals 50 times the average of national income per capita. Only official costs are included.

Quality of land administration index includes five dimensions:

  • Reliability of infrastructure index.
  • Transparency of information index.
  • Geographic coverage index.
  • Land dispute resolution index.
  • Equal access to property rights index.

Iraq ranks 10.5 in this index.

Getting Credit:

This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending.

According to World Bank reports, Iraq is struggling with an actual crisis in this field.

Strength of legal rights index:

Which measures: Rights of borrowers and lenders through collateral laws. And Protection of secured creditors’ rights through bankruptcy laws.

This, in turn, facilitates loaning process.

Iraq has scored (zero) in this index.

Depth of credit information index:

which measures: Scope and accessibility of credit information distributed by credit bureaus and credit registries

Iraq has scored (zero) at this indicator as well.

Credit bureau coverage (% of adults):

which shows Number of individuals and firms listed in largest credit bureau as a percentage of adult population.

Iraq scored 1.3%, which is the lowest percentage among the countries of Middle East and North Africa region, where it reached 16%.

Credit registry coverage (% of adults):

which shows Number of individuals and firms listed in credit registry as a percentage of adult population.

Iraq has scored (zero) rate, which is the lowest among the countries of the Middle East and North Africa, as it reached 16.3% there.

Protecting Minority Investors:

This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse.

Number of companies registered for trading on Iraq Stock Exchange is 10 companies.

Extent of disclosure index: Iraq ranked 4.0 in this indicator.

Ease of shareholder suits index: Iraq ranked 5.0 in this index.

Extent of ownership and control index:  Iraq ranked 3.0 in this index.

Extent of corporate transparency index: Iraq ranked 1.0 in this index.

Paying Taxes:

This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with post filing procedures (VAT refund and tax audit).

Tax payments for a manufacturing company in Iraq:

Doing Business report records the taxes and mandatory contributions that a medium-sized company must pay or withhold in a given year, which has reached 15 tax payments in Iraq.

Time required to comply with major taxes (hours per year):

Time period required to prepare declarations, pay or withhold the corporate profits tax, value-added tax, and social security contributions (hours per year).

Companies in Iraq need 312 days to complete tax returns.

Total tax and contribution rate (% of commercial profits):

  • Profit or corporate income tax.
  • Social contributions, labor taxes paid by employer.
  • Property and property transfer taxes.
  • Dividend, capital gains, financial transactions taxes.
  • Waste collection, vehicle, road and other taxes.

Total strike price from profit in Iraq is 30.8%.

Trading across Borders:

Doing Business records the time and cost associated with the logistical process of exporting and importing goods. measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods.

Time to export, Border compliance (hours): 85.

Time to export, Border compliance (USD): 1118.

Time to import: Border compliance (hours): 131.

Cost to import: Border compliance (USD): 644, which is considered as highest cost in compare to the import cost in Middle East and North Africa region.

Enforcing Contracts:

The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes

index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system.

Time required to enforce a contract through the courts (calendar days):

  • Time to file and serve the case.
  • Time for trial and to obtain the judgment.
  • Time to enforce the judgment.

520 days needed for enforcing a contract in Iraq.

Cost required to enforce a contract through the courts (% of claim value):

  • Average attorney fees, Court costs, Enforcement costs, which ranked 28.1% in Iraq.

Resolving Insolvency

Doing Business studies time, cost, and outcome of insolvency proceedings involving domestic legal entities.

These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings.

To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit.

Doing Business report indicated that Iraq does not have any documented practices or regulations in this field.

This regulatory insufficiency in Iraq includes recovery rate, time for recoveries, costs of recovery procedure, sale of assets after bankruptcy, as well as the index of the insolvency framework solidity.

 

Source: www.doingbusiness.org

 

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