Reforms in East Asia and Pacific, 2007-08
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Brunei
In Brunei no major reforms were recorded.Cambodia
Cambodia’s new secured transactions law made it the world’s top reformer in getting credit in 2007/08. The new law allows movable property to be used as collateral. And an online unified collateral registry is now in operation. In addition, Cambodia adopted the 2007 Bankruptcy Law, its first ever regulating the bankruptcy of private enterprises. The law introduces a reorganization procedure to restructure insolvent companies.Areas of reform: Getting Credit (Legal Rights), Closing a Business
China
China made getting credit easier by expanding the range of assets that can be used as collateral through a new property law in October 2007. Accounts receivable and a combination of assets can now be used to secure a loan. China also tightened the rules on enforcement of judgments, making it harder for debtors to prevent enforcement. And it eased the tax burden on businesses by reducing the corporate income tax rate from 33.3 percent to 25 percent and unifying the criteria and accounting methods for tax deductions. A new labor contract law has had a mixed impact. The new law empowers workers and recognizes their right to paid annual leave. But it also makes firing workers more difficult by introducing priority rules for redundancy dismissals and increasing dismissal costs. The flexibility of working hours was also reduced.Areas of reform: Getting Credit (Legal Rights), Paying Taxes, Enforcing Contracts, Employing Workers (making it more difficult)
Fiji
Fiji adopted new regulations for construction permitting that added three new preapproval procedures relating to health, fire safety, and water and sewerage connections. The Employment Relations Promulgation 2007 strengthened protections against workplace discrimination and shifted dispute resolution from litigation to mediation. It also made dismissing workers more difficult by requiring prior notification for redundancy dismissals.Areas of reform: Dealing with Construction Permits (making it more difficult), Employing Workers (making it more difficult)
Hong Kong (China)
Hong Kong (China) granted trustees more power in bankruptcy proceedings, a change expected to make the liquidation procedure more efficient. Under the “Be the Smart Regulator” program, a broad initiative to improve business licensing, the government reduced the time to deal with construction permits by 36 days and eliminated 8 procedures related to inspections and preapprovals.Areas of reform: Dealing with Construction Permits, Closing a Business
Indonesia
Indonesia made getting credit easier by guaranteeing the right of borrowers to inspect their credit data at the Bank of Indonesia, helping to improve the quality and accuracy of the information financial institutions use in assessing the risk profiles of borrowers. Indonesia made business start-up faster but also almost doubled the minimum capital requirement.Areas of reform: Getting Credit (Information), Starting a Business (making it more difficult)
Kiribati
In Kiribati no major reforms were recorded.Lao People’s Democratic Republic
In the Lao People’s Democratic Republic no major reforms were recorded.Malaysia
Malaysia abolished the real property gains tax and reduced the corporate income tax rate to 26 percent (the rate had previously been tiered). A further reduction to 25 percent is planned for next year. The reform also introduced a single-tier tax system, in which profits are taxed only after dividend payments are exempted. Amendments to the Companies Act simplified business registration and reduced the time required by introducing online filing of registration documents.Areas of reform: Starting a Business, Paying Taxes
Marshall Islands
In the Marshall Islands no major reforms were recorded.Micronesia
In Micronesia no major reforms were recorded.Mongolia
Mongolia facilitated trade by creating a single window for customs clearance, introducing a partial system of risk management, and implementing postclearance audits. These changes have reduced both the time and the documents required for exporting and importing. Mongolia also eased the tax burden on employers by reducing their social insurance contribution from 19 percent to 11 percent of gross salaries.Areas of reform: Paying Taxes, Trading across Borders
Palau
Palau facilitated trade by automating customs declarations. Traders can now submit documents by email or on a flash drive. The time required for import documentation has been reduced by two days.Areas of reform: Trading across Borders
Papua New Guinea
In Papua New Guinea no major reforms were recorded.The Philippines
The Philippines upgraded the risk management and electronic data interchange system for customs, reducing the time to import by a day.Areas of reform: Trading across Borders
Samoa
Samoa lowered the corporate income tax from 29 percent to 27 percent and the capital gains tax from 30 percent to 27 percent.Areas of reform: Paying Taxes
Singapore
Singapore, the top-ranked economy globally on the ease of doing business, sped the process for dealing with construction permits, reducing the time from 102 days to 38. Almost 99 percent of applications are now submitted electronically through the Construction and Real Estate Network (CORENET). Singapore also simplified the online process for business start-up, cutting a procedure and reducing the time required by a day.Areas of reform: Starting a Business, Dealing with Construction Permits
Solomon Islands
In the Solomon Islands no major reforms were recorded.Taiwan (China)
Taiwan (China) amended its civil code to make secured lending more flexible. Since September 2007 parties to a mortgage or pledge agreement have been allowed to set the loan amount as a maximum line of credit.Areas of reform: Getting Credit (Legal Rights)
Thailand
Thailand made paying taxes easier by reducing some fees and facilitating online filing and payments. In addition, it now exempts companies with taxable income not exceeding 1.2 million baht from corporate income tax and applies concessionary 25 percent rates for newly listed companies. Amendments to the Securities and Exchange Act strengthened minority shareholder rights. Directors now have greater duties with respect to transactions between interested parties. If held liable for using the company’s assets for their own benefit, they will have to pay damages, disgorge profits, and pay fines—and may even go to jail. Provisional reductions of the property transfer fee and specific business tax have lowered the cost to transfer property from 6.3 percent of the property value to 1.13 percent. A new internet-based customs clearance system reduced the number of documents that must be submitted in hard copy from 9 to 3 for imports and from seven to four for exports.Areas of reform: Registering Property, Protecting Investors, Paying Taxes, Trading across Borders
Timor-Leste
In Timor-Leste no major reforms were recorded.Tonga
Tonga implemented more regulations of its 2005 building code, decreasing the number of procedures for dealing with construction permits from 14 to 11 and, with administrative improvements, reducing the time needed by 12 days. New regulations on business licensing reduced the time to start a business by one week.Areas of reform: Starting a Business, Dealing with Construction Permits
Vanuatu
Vanuatu strengthened creditor protections by ensuring that secured creditors have priority outside bankruptcy procedures over unsecured creditors and subsequently registered secured creditors. The improvement comes as a result of the Personal Property Securities Act passed in 2008. The act also broadens the range of assets that can be used as collateral and allows out-of-court enforcement of security rights.Areas of reform: Getting Credit (Legal Rights)
Vietnam
Vietnam’s public credit registry now keeps information on record longer, providing financial institutions with more data on the repayment history and debt capacity of potential borrowers.Areas of reform: Getting Credit (Information)