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Saturday, January 29, 2005

How long it takes to start a business in Romania?

For most foreign investors that are considering comming to Romania, the answer to this question can make the difference between a possitive or a negative decision.

Let's take a look at the process, based on data from World Bank's latest report.

Presuming you have everything clear in you business plan, these are the procedures you need to go through in Romania:

1. Reserve company name. This should only take a day and the associated cost should be no more than 10 USD.

2. Obtain proof of funds. This should also take a day and it has no associated costs.

3. In order to obtain the certificate of fiscal record, you need to wait for about 5 days. Also, you will need about 6 USD for this procedure.

4. The longest step is register your company at the Unique Office. This method has been implemented for quite a short time and it is much faster than the previous procedure. You should plan about 20 days for this step and an associated cost of about 190 USD.

5. The final step is registering with the labor authorities. This is also a short step which you should complete in one day with no associated cost.

This brings us to a total of 28 working days and a total cost little over 200 USD. Of course, you should keep in mind that this procedure has been calculated for a simple start-up, limited liability company (SRL in Romanian) with no more than 50 employees, leases the commercial plant and offices and is not a proprietor of real estate. Additional costs (time & money) may occur in case your business deals with special authorization requirements or you need to have more financial regulations satisfied.

The procedure is now one of the fastest in Europe. As a comparison, it takes 32 days and over 230 USD to register a company in Bulgaria, as you have to go through 11 steps. In Poland, it should take you about 31 days and a cost of over 1.100 USD. In Germany is even more complicated, as you have to wait 45 days and pay over 1.500 USD.

The fastest procedure happens in Australia, where you only need 2 days and 600. Second comes Canada with 3 a days long procedure. The USA is on third place. You need 5 days and 210 USD to registed an LTD in Uncle Sam's land.

Other indicators.

Some other indicators that are calculated for Romania are:

- Difficulty of Hiring Index is 78 while the OECD average is 26.

- Difficulty of Firing Index is 50 while the OECD average is 28.

- In order to transfer a property title from the seller to the buyer you need 170 days in Romania, while the OECD average is at 34.

- Romania protects its investors pretty well, as the Disclosure index is 2, while the OECD average is 5.6 (on a 0 to 7 scale).

- Bankrupcies are still a big problem in Romania, as you need 4.6 years to close a company through bankrupcy procedure. The recovery rate is 6.9 cents / 1 invested USD. In OECD the average time is 1.7 years with a recovery rate of more than 70 cents / dollar.

Posted by Mihai : 1/29/2005 01:18:00 pm