Increase Ease of Doing Business (CV0001)

Commitment 1:
Increase the Ease of Doing Business in Cabo Verde
July 2018 — July 2020 Lead implementing
agency or actor
What is the public problem
that the commitment
will address?
What is the commitment?
How will the commitment
contribute to solve
the public problem?
Competitiveness Unit
Cabo Verde has a high rate of unemployment and has experienced
relatively weak economic growth over the past decade. Moreover, its
public debt currently stands at 125% of GDP. A major priority of the
Government is to undertake critical reforms that lead to job creation,
economic growth, and social inclusion.
By 2027, Cabo Verde will have completed the necessary reforms and
structural changes to earn a top-50 ranking on the World Bank’s
Ease of Doing Business Index.
The far-reaching reforms will involve numerous public- and privatesector
actors, including several government ministries,
municipalities, chambers of commerce, micro-finance NGOs, ITCs,
and private business representatives.
These reforms will be coordinated by Competitiveness Unit, a new
inter-sectorial agency created by the Prime Minister in July 2018,
and reflect the Doing Business methodology recommended by the
World Bank. Support from the European Union, United Nations,
World Bank, and other international institutions will help fund the
reforms.
The Competitiveness Unit has developed a comprehensive action
plan and strategy for streamlining existing processes pertaining to
permits, licenses, regulations, clearances, approvals and
authorizations. The Unit will also strive to innovate by collaborating
with ITCs to digitize many business processes and procedures,
including e-signature, territorial demarcation, on-line tax payment,
and other essential transactions.
Pursuing this commitment will contribute to a more open society by
making it much easier for citizens to have access to credit, start a
business, commence construction, pay/document taxes, and access
an array of information and services online Why is the commitment
relevant to OGP values?
The commitment to increase the ease of doing business in Cabo
Verde will not only precipitate stronger economic growth but also
empower citizens to take private initiative. Equally important, the
reforms will add transparency to government processes, improve
public service, reduce costs for opening/operating a business, and
make options for self-service transactions and informational retrieval
more readily accessible.
The reforms reflected by this commitment follow naturally from
others undertaken over the past decade. In 2008, for example, a new
law aimed at expediting company creation went into effect.
Registration became relatively straightforward and the concept of
“business in one day” is increasingly the norm. Joint stock
companies (JSCs) and limited liability companies (LLCs) can be
established by any office of the Commercial Registry Department of
Casa do Cidadão.
In 2014, additional measures were approved to simplify the
procedures for the amendment of commercial companies and
introduce a single fee for their creation, alteration, or closure.
Only one business establishment procedure - obtaining a municipal
license - is now relatively burdensome for firms, as is requires an
inspection, takes eight days to process, and carries a significant fee
of CVE 30,000. Since 2009, however, this process can be finalized
following the start of operations, a practice in line with common
international standards.
At present, the Government is also looking to simplify the work of
notaries by creating a database of pre-approved company names that
could be used by new firms.
With the support of the World Bank, Cabo Verde has secured a €2M
budget from the European Union to fund this commitment.
The commitment is also consistent with Cabo Verde’s Strategic
Development Plan (PEDS). Milestone activity with
a verifiable deliverable
• Establish and empower Competitiveness Unit
• Approach top-100 ranking by 2020
• Achieve top-100 ranking by 2021
• Continue to rise in ranking through 2022 and beyond
July 2018 — July 2022
Overarching
Milestones
July 2018 — July 2022
Launch
Online Platform for
Starting a Business
July 2018 — July 2022
Launch
Searchable Platform for
Commercial Licenses
July 2018 — July 2021
Introduce
Collateral Registry and
Private Credit Bureau
November 2018 — July 2022
Develop and Execute
Communication Strategy
for Law of Insolvency
December 2018 — May 2019
Enact
New Law to Protect
Minority Investors
December 2018 — May 2019
Complete
Digital Land Registry
for Praia/Santiago
December 2018 — May 2019
Introduce
Trade Portal and Single
Form of Trade Procedures Contact information
for lead actor
Other actors involved
(Government)
Other actors involved
(Non-Government)
Luis Teixeira
Special Adviser to the Prime Minister and
Executive Director of the Competitiveness Unit
luis.v.teixeira@gpm.gov.cv
+238 333 1513
Ministry of Finance
Ministry of Industry and Commerce
Ministry of Justice and Labour
Ministry of Transportation and Tourism
Municipalities
Chambers of Commerce
Micro-Finance NGOs
ITCs
Casa do Cidadão

1. Increase the Ease of Doing Business in Cabo Verde

Language of the commitment as it appears in the action plan:

“By 2027, Cabo Verde will have completed the necessary reforms and structural changes to earn a top-50 ranking on the World Bank’s Ease of Doing Business Index (…) Pursuing this commitment will contribute to a more open society by making it much easier for citizens to have access to credit, start a business, commence construction, pay/document taxes, and access an array of information and services online.”

Milestones:

1. Overarching milestones

1. Establish and empower Competitiveness Unit
2. Approach a top-100 ranking by 2020
3. Achieve a top-100 ranking by 2021
4. Continue to rise in rankings through 2022 and beyond
1. Improve online tax collection and documentation
2. Introduce a collateral registry and private credit bureau
3. Launch an online platform for starting a business
4. Launch a searchable platform for commercial licenses
5. Develop and execute a communication strategy for law of insolvency
6. Enact a new law to protect minority investors
7. Complete digital land registry for Praia/Santiago
8. Introduce a trade portal and a single form of trade procedures

Start Date: July 2018

End Date: July 2020

Editorial Note: the commitment description provided above is an abridged version of the commitment text; please see the full action plan here.

Context and Objectives

The government’s priority is to undertake critical reforms that lead to job creation, economic growth, and social inclusion. To this end, this commitment seeks to improve the country’s business framework, which includes implementing technology innovations, improving access to information, and instituting legislation updates. Milestones aim to develop tools to collect data on taxes, business platforms, land and collateral registries, and make information on business procedures and processes more available to citizens.

As stated in the action plan, the main problem this commitment seeks to address is Cabo Verde’s high rate of unemployment and relatively weak economic growth over the past decade. According to the World Bank, GDP growth rates in Cabo Verde averaged 2.6% between 2010 and 2018 against 7.2% in the period of 2000 to 2009. Unemployment rates increased from 11.1% (2000–2009) to 11.8% (2010–2018). ^[1] Cabo Verde received a score of 53.4 in both 2016 and 2017 for ease of doing business. ^[2]

The commitment milestones are specific enough to be verifiable. The activities are clearly stated, notably to improve online tax collection and documentation, to enact specific laws, and to launch an online platform for starting a business. Verifiability can thus be assessed by determining whether the online tools were created and laws enacted. How to measure progress on the development and implementation of the communication strategy for the law of insolvency is less clear (milestone 6). It is clear that these milestones will contribute to a high ranking in the Ease of Doing Business Index. However, it is less apparent how they will contribute to Cabo Verde’s economic challenges and low employment rate as described in the commitment text. A closer connection between the milestones and the overall policy objective would have raised this commitment’s level of ambition.

Several milestones in this commitment are not directly related to the open government values of transparency, civic participation, or public accountability. These include milestones 1, 2, 7, and 9. Milestone 1 aims to establish a Competitive Unit (CU) under the Ministry of Finance. ^[3] The unit will be responsible for the inter-sectoral coordination of policies to improve the country’s ranking in the Ease of Doing Business Index. According to Luis Teixeira, the government point of contact for this commitment, the Unit aims to make public procurement more transparent and to improve the legal environment for doing business. ^[4] The unit’s mandate will include revising the business registration law, companies’ law, insolvency law, and movable property guarantee laws. ^[5] Milestone 2 seeks to improve online tax collection and documentation to encourage companies to pay their taxes online. Luis Teixeira reports that only 3% of the companies currently pay their taxes online. The government intends to work with the private sector and professional associations to increase online tax payment. ^[6] Although Milestone 7 is not related to the three OGP values this report assessed, this milestone may be relevant to open government if it promotes the inclusion of citizens otherwise not typically included in government processes.

A handful of milestones under this commitment are tangentially related to the OGP value of access to information. These milestones seek to make government-held information accessible to the public through online portals and communication strategies. However, it should be noted that the information to be made public is only useful to highly specific segments of the population, such as legal and business professionals. This is true of milestone 3, which intends to make a public collateral registry. Milestone 4 seeks to improve online platforms to make starting a business easier and increase citizens’ awareness of online business resources, such as ProEmpresa. ^[7] Under milestone 5, the government aims to make commercial licenses publicly accessible on existing platforms. ^[8] Milestone 6 seeks to raise awareness of Cabo Verde’s Insolvency Law, which was approved in 2016 but is poorly enforced. Therefore, the government’s communication strategy targets entrepreneurs, judges, accountants and lawyers to increase understanding of the law. ^[9]

Finally, under milestone 8, the government intends to create a public land registry. After collecting and digitizing the data, the government plans to make land data for Praia, Santiago, accessible online through the Registry, Notary, and Identification webpage. This milestone is intended as a pilot program that will then be extended to other locations and islands. Milestone 9 seeks to make a publicly accessible portal for trade information. As a result of these milestones, this commitment may change open government practices by increasing citizens’ access to business information.

This commitment is expected to result in minor changes to the ease of doing business in Cabo Verde. The commitment clearly outlines the policy problems to be addressed. These problems are slow economic growth, bureaucratic obstacles for businesses, and high unemployment rates. The milestones listed begin to address the general business environment. However, it is not clear exactly how the milestones respond to the problems described. For example, it is not apparent how a higher ranking in the Ease of Doing Business Index will advance the overarching goal of economic growth. A closer connection between the milestones and ultimate policy objective would have increased this commitment’s level of ambition. The milestones therefore outline important but only initial steps to promote job creation, economic growth, and social inclusion in Cabo Verde.

Next steps

The IRM researcher recommends greater interaction with the OGP values to increase the potential of the commitment. During the implementation of all milestones, it is important to:

• Convene a multistakeholder group with civil society, government, and private sector representatives to oversee implementation.
• Consult and involve the business community and civil society throughout implementation. For example, to design and test information portals and registries to make sure they are user friendly and meet citizens’ needs. Include representatives from across sectors of society and the islands.
• Discuss with civil society and the public how to expand current milestones to include the release of government-held information to further commitment aims. For example, would a public land registry, open contracting, or beneficial ownership platform address Cabo Verdeans’ priorities?

1. Increase the Ease of Doing Business in Cabo Verde

Limited:

This commitment aimed to improve the ease of doing business in Cabo Verde by revising legal frameworks and improving online government services such as filing taxes and starting a business.

Most activities under this commitment were not started during the implementation period. While four of the nine milestones (1, 2, 3, and 6) saw some implementation, these activities had limited relevance to open government.

In April 2018, the government passed a resolution (Resolution of the council of ministers n. 36/2016) to create the Competitiveness Unit (CU) under the Ministry of Finance. [1] Creating the CU is part of the tasks of the Milestone 1. The CU is responsible for the intersectoral coordination of policies to reinforce the country's competitiveness. The unit does not have a dedicated webpage, but it hosts a “Doing Business[ ]Cabo Verde” Facebook page, that shares ongoing results with the wider public. [2] Milestone 1 also aimed to improve Cabo Verde’s position in the World Bank's Doing Business index. Despite of the termination of the index, Cabo Verde will continue implementing reforms to improve the business environment. The country is also focusing on other similar rankings, such as the Index of Economic Freedom, held by the Heritage Foundation. [3]

Milestone 2 was to improve online tax collection and documentation. According to government information, [4] this service began in 2019 and went from 3% of companies participating to 38% to date.

The government had not established a public collateral registry by the end of the implementation period (Milestone 3). However, the Competitiveness Unit noted that the online collateral registry is due to be launched by the end of April 2022. [5] In the interim, the government revamped the Credit Risk Center database overseen by the Central Bank. [6] The platform integrates data from private banks and utility companies and enables banks and credit granting institutions to access information on credit granted to individuals or companies. Individuals can also access their own information and request corrections in case of errors. [7] This information is only available to the wider public in aggregate form.

Milestone 6 (develop and execute a communication strategy for the Law of Insolvency) created initiatives to raise awareness about the insolvency law, [8] approved in 2016. However, there remains a low level of public adherence to this law. The communication strategy targeted entrepreneurs, judges, prosecutors, accountants, and lawyers. Conferences followed by training sessions [9] were held in Sal (2018), Praia (2019), and Mindelo (2019), and information about these events was disseminated on media outlets. [10] Yet, despite these efforts, usage of the law lags behind expectations, and new consultations are being made to reframe the approach. [11]

Milestones that had no progress during the implementation period are 4, 5, 7, 8, and 9.

The state technology company NOSi is currently developing an online platform for creating companies (Milestone 4) and a searchable platform for commercial licenses (Milestone 5). [12] An advisor to both the Prime Minister and the Competitive Unit, Luis Teixeira, reported that the platform for creating companies depends on implementing digital signatures and issuing digital identities. For now, a company can be founded through a simplified procedure at Casa do Cidadão (Citizen House), but only in person. Teixeira explained that commercial-license platform is in progress and intended for delivery in January 2022. [13]

The government, with technical assistance from the World Bank, is currently working to reform the legal framework, including the Código de Sociedades das Empresas (Business Act). Through this reform, the government will establish legal protections for minority investors as planned under Milestone 7. [14]

According to Teixeira, the government has not made progress to establish a public land registry for the capital city of Praia (Milestone 8) as high costs have required the government to push back the timeline for delivery. Finally, the government is currently seeking applications through its public procurement process for developing a platform for external trade (Janela Única de Comércio Externo) as listed under Milestone 9. The project is expected to be completed around June 2022. [15]

Considering the information above, the IRM researcher found that the commitment was limited in its completion. Several milestones (3, 5, 6, and 8) were relevant to the open government values of access to information. However, none of these commitments were implemented to the extent that citizens had greater access to government-held information by the end of the implementation period. In future action plans, the IRM recommends assessing draft commitments to confirm all milestones aim to strengthen public accountability, transparency, and/or civic participation.

Moving forward, Teixeira shared that the government would like to pursue public procurement reforms, including improving transparency and creating incentives so that small- and medium-sized companies can win more tenders. [16] When designing open contracting reforms, the IRM recommends that the government: