Effective Municipality

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Methodology

 The Local Business Environment Index is aimed at distinguishing the differences in local business climate and investigating where in Bulgaria (in which city or municipality) it is easiest to do business. The index includes all 28 Bulgarian regions, and every region is represented by one city - usually the biggest one (regional capital). Cities included are as follows:

Each of those cities is ranked according to predefined indicators. The indicators and calculation are described below.

І. Indicators

The Local Business Environment Index is based on six main indicators, with each of them consisting of several sub-indicators. The six main indicators have equal weights in the final ranking. The indicators identified are as follows:

1.      Level of local taxes

1.1.  Size of property tax - delimited in the interval 0.5 to 2 per thousand of the tax valuation of the property

1.2.  Size of car tax - meaning the tax on automobiles with engine power between 74 kW and 110 kW included - from 1.10 to 3.30 leva per 1 kW

1.3.  Size of patent tax (per annum), meaning retail trade in up to 100 square meters of trade area - the tax is from 2 to 20 leva per 1 square meter of trade area dependent upon location

2.      Local fees

2.1. Size of waste disposal tax for non-residential property of legal persons

2.2. Size of tax for market utilization and trade with industrial goods (per day)

3.      Local regulation of economic activity

3.1.  Presence (or absence) of regulatory regime for stationary trade site

4.      Electronic administration

4.1.  E-government:

• Does the municipality have its own web-site
• What is the scope of electronic administrative services - I level (information), II level (one-directional interaction), III level (two-directional interaction), IV level (transaction);

4.2.  One-desk services

• Does the municipality have a fully operational one-desk services
• Readiness for practical work on one desk - basic stage, developing stage, working stage, excellent stage

4.3.  Public registers - maintenance and online accessibility on the internet

• Property registers
• Municipal property registers
• Register of municipal property transactions

5.      Administrative services

5.1.  Construction permit procedure

• Time needed for obtaining a construction permit, given the presence of a detailed city plan
• Difficulties in the interaction with municipal administration in the process of obtaining a construction permit

5.2.  Environmental impact assessment procedure

For investment proposition under Appendix 1 of the Environment Protection Act:

• Time for obtaining a permit regarding the Environmental impact assessment
• Difficulties in the interaction with municipal administration and representatives of the Regional Inspectorate for Environment and Water and the Ministry of Environment and Water in the process of obtaining an Environmental impact decision

 For investment proposition under Appendix 2 of the Environment Protection Act and which requires an evaluation of the feasibility of conducting an Environmental impact assessment:

• Time for receiving a decision regarding the need for Environmental impact assessment
• Difficulties in the interaction with municipal administration and representatives of the Regional Inspectorate for Environment and Water and the Ministry of Environment and Water in the process of receiving a decision regarding the need for Environmental impact assessment

5.3.  Change of the status of agricultural lands

• Time needed for the change of status of agricultural lands in the presence of detailed land allocation plan
• Difficulties in the interaction with municipal administration in the process of changing the status of agricultural lands

6.      Corruption in the local administration

6.1. How serious is the problem with corruption in local administration

6.2. How often are firms and enterprises forced to pay bribes

6.3. Anti-corruption policies:

• Have the local authorities implemented effective anti-corruption initiatives
• Are there adequate rules and regulations requiring a high degree of transparency regarding financial matters and it the conflict of interests checked in the local administration
• Are local-level procedures regarding public procurement transparent

 There are questionnaires for all indicators grouped in Administrative questionnaire and Business questionnaire. Needed data are obtained through those.

 

 ІІ. Methodology & Calculation

 Based on the above-described indicators, we rank every studied city relative to the others  through a technique of percentile standardization. This method is useful for combining indicators with different distribution. Based on scientific research and consultation with local authorities, business representatives and civil society organizations, we reached the conclusion that those six indicators describe relatively thoroughly the conditions for doing business at a local level in the different regions of the country. Therefore they successfully reflect the differences in the business environment dependent on local authorities and the regional representatives of the central authorities.

The following data collection methods were used:

• Analysis of local regulations and acts
• Research of internet sites of municipalities and other regional administrative organs
• Conducting a survey among representatives of local business, civil society structures, legal professionals, representatives of the local authorities and administration
• Interviews, focus groups and meetings with representatives of business and administration

Processing of the information from the questionnaires and the surveys went through the following procedure:

• Preparation of data entry matrix
• Data entry and quantification of data, preparation for quantitative analysis

Statistical analysis - in this case applicable methods include one- and two-dimensional distributions, means, medians and modes, test of statistical significance and hypothesis testing

The methodology for ranking each city based on the quantitative information obtained form questionnaires, surveys and interviews is as follows:

• All six indicators have equal weights, i.e. they are represented equally in the final ranking of each city and thus the issue of subjective weighting is avoided
• A sub-ranking of each city is prepared. This sub-ranking is independent of the result of the city according to other indicators.
• For the preparation of sub-rankings we use percentile groups and percentile ranking.
• For the preparation of the final ranking of each city an averaged rank is   calculated based on its percentile ranks of all indicators; the city is then ranked among its peers based on the final rank

The World Bank points out three main advantages of using ranks in the presentation of the Doing Business index:

 

1. Firstly, this method for data presentation is easily accessible for politicians, journalists and experts, and therefore, can be used to jumpstart reforms

2. Secondly, rank presentation allows following tendencies and different features in business regulation. For example, in Europe northern countries tend to score higher in the Doing Business index, i.e. doing business is easiest there, whereas the Baltic countries are characterized by most ambitious reforms (and relatively quick improvement in ransk).

3. Thirdly, this approach enables the measurement of the reform's effects. Politicians usually want to know what they "gain" from a certain reform and through simulating a few measures (like decreasing the number of procedures or the time for a certain administrative service) can see in practice the change in positions relative to the other participants in the ranking.

Even though one city may occupy the very first place in the ranking, this does not mean that in this region the business environment is optimal and regulation - the most efficient one possible. The first places show only that the business climate in these cities is relatively better that other cities. Of course, those may differ significantly for every individual case depending on the type of economic activity, the entrepreneur's resources and her behavior and the decisions she makes.

 

Therefore, high ranks only show that local authorities and the regional representatives of the central authorities have created a regulatory climate that helps (or does not hinder significantly) the process of doing business and generally aids (or hinders less) the entrepreneurs in their efforts to risk, invest, and create value in the economy.

 

ІІІ. Mathematical Definitions

Percentile is that value from the frequency distribution under which a certain percentage of the sample is to be found. For example, the 30^th percentile - this is the value below which 30% of the sample's values are. The 30^th percentile can also be defined as the smallest value in the sample which is larger or equal to 30% of the values. The 20^th percentile is called quintile, the 25^th- quartile, and the 50^th - the median of the sample.

The percentile rank is the ordinal place of the variable's value in the frequency distribution.