Post-Conflict and Fragile State Turning Around the Private Sector in Timor-Leste
IFC Investment Climate Advisory Services and Donors Help Cut Red Tape in Business Registration and Trade Processes
Over the past 12 months, the government of Timor-Leste has introduced clearer and simpler procedures making it easier for local business owners to set-up and run their operations.
The reforms are a result of a joint effort of IFC and the governments of Australia, Japan and New Zealand and will contribute to Timor-Leste’s economy by providing jobs and services.
“This new process is great news for local business owners looking to formally establish their companies,” says Minister of Justice Lúcia Lobato. “Simplified registration procedures better meet the needs of the business community, are much less time-consuming, and are easier to understand. Timor-Leste is a new, growing economy, and it is vital the country’s formal processes support entrepreneurs.”
Simplifying business start-up procedures
The Doing Business 2012 report found that local business owners in Timor-Leste had to wait 103 days to register their companies. Some cases were dragging out for as long as twelve months. To improve the situation, a team from IFC, a member of the World Bank Group, conducted surveys within the Ministry of Justice’s Public Registry Department to investigate how long business registration applications were taking to administer, and where the hold ups in the system were occurring. Results showed overly complicated procedures were delaying the application process significantly.
To streamline the registration procedures and cut processing time, the Ministry established a list of documents business owners need to submit with their applications. The department also reorganised staff by defining clear roles and responsibilities, and invested heavily in training on the new procedures.
Follow-up surveys conducted by IFC to assess the impact of the changes found that these measures yielded remarkable results: the number of days to register a company had decreased to just 19.
“If we make it easier to start a business, then there will be more businesses established in Timor-Leste, creating economic opportunities and jobs,” says Júlio Alfaro, President of the Chamber of Commerce and Industry.
All services under same roof in one-stop shop
Since the end of January, the Public Registry Department has further reduced the time to register a business to just five working days. The next step in simplifying business registration will be the establishment of a one-stop-shop later this year. The single window will enable business owners to obtain a commercial registration certificate, licence, and tax identification number under the same roof.
“Cutting red tape makes it easier for entrepreneurs to start a business and allows established business owners more time to run and grow their operations,” said Milissa Day, IFC Resident Representative in Timor-Leste. “IFC is committed to working closely with the Government to build on this progress through the formation of the one-stop-shop over the coming months.”
To keep business owners in Timor-Leste up-to-date about the new procedures, the government is currently undertaking a public awareness campaign. The country is also committed to regularly surveying businesses to make sure the new procedures are being followed and they are receiving high standards of service.
Making trading across borders easier for businesses
Supported by IFC, the government of Timor-Leste also improved customs clearance procedures for motor vehicles. Entrepreneurs operating in the mountainous island nation heavily rely on vehicles to do business?be it for exporting coffee beans overseas or transporting food to the local market.
As a result of a thorough public-private dialogue between Timorese and international business owners, and the government reforms have been passed cutting the time to obtain imported cars has from four months to one week.
Clear guidelines are making it easier for importers to gain approval for their vehicles. By saving businesses time and money, these changes allow local companies to get about their business while helping the government align with international best practice.
A one-stop-shop for all import-related matters was established in November last year to streamline clearance processes. Now, rather than waiting for three departments to clear an imported vehicle upon its arrival in the country, all paperwork can be handled by the Director of Customs at the port.
“My cars are being released from customs very quickly,” says Sandra Silva, Director at eSilva Car Rentals, a local car hire company and vehicle importer. “I supply all of my paperwork well in advance, and will usually see my cars clearing customs in two days.”
Importers are also being asked to provide a road-worthiness certificate for their vehicles, with cars over five years old generally being prohibited from entering the country. Not only is this measure environmentally-friendly, but it will also stop Timor-Leste from becoming a “dumping ground” for older vehicles that break down shortly after entering the country. Since these new procedures have come into practice, the customs department has seized eight vehicles which had had their manufacturing dates falsified.
Moving forward, IFC will continue to work with the customs department to ensure the implementation of these reforms, and will involve local businesses in monitoring their progress. Programs to further improve the business environment in Timor-Leste are ongoing. Currently, IFC is helping the government of the country to implement reforms in the area of fresh food clearance procedures.