Improving the Business Environment through
Sub-national Regulatory Simplification
Luke Haggarty
General Manager,
IFC Advisory Service Office, Latin America and the Caribbean
OECD, Global Forum for Governance. Rio de Janeiro, Oct. 2007
What is the IFC?
•International Finance Corporation,
founded in 1956. Part of the World
Bank Group
The arm of the World Bank Group that is focused on
Private Sector Development as the engine for
growth, poverty alleviation and improving the
quality of life in developing countries.
IFC has two main lines of Business:
● Investment (Credit, Guarantees, Equity, etc)
● Advisory Services: Business Environment,
Access to finance, PPPs in infrastructure, Supply
Chains and Increasing local benefits in extractive
industry investment.
2
REGULATORY SIMPLIFICATION
Where do you need to work?
How do you implement?
Some data and ideas….
3
Latin America is in the middle of the worlds regions…..
Ease of Doing Business (Average Rank )
160
Average Rank
140
120
100
80
60
40
20
0
OECD
E. Europe E. Asia &
& C.Asia Pacific
LAC
MENA
S. Asia
Africa
Source: Doing Business, 2008
4
..and Brazil is one of the least reforming countries in the region
Ranking Global 2008
1 Singapore
33 Chile
Easier to do
Business
44 México
58 Perú
65 Panamá
98 Uruguay
109 Argentina
115 Costa Rica
More Difficult to
do business
122 Brasil
172 Venezuela
178 Countries
Source: Doing Business 2008
5
There is large variation in its performance across variables
depending upon level of Govt.
Doing Business 2008 rank
160
Rank of 178 Countries
140
Central Govt. Control
Local Govt. Control
120
100
80
60
40
20
0
Protecting
Investors
Getting
Credit
Trading
Across
Borders
Enforcing
Contracts
Dealing Registering Employing Starting a
with
Property Workers Business
Licenses
Closing a
Business
Paying
Taxes
Source: Doing Business 2008
6
The interpretation of regulation is not predictable according to
the private sector …
Interpretation of regulation by officials is predicitable
% of mgrs who agree
70
60
50
40
30
20
10
0
LAC
ECA
MENA
Africa
OECD
EAP
S. Asia
Source: WBG Firm Survey 2006
7
… and Brazil is below the regional average
Interpretation of Regulations by Officials is Predictable
80
70
% of Mgr
60
50
40
30
20
10
e
Ch
il
Pa
na
ma
ta
Ri
ca
Co
s
r
mb
ia
Co
lo
Sa
lva
do
a
El
rag
u
Ni
ca
Me
xic
o
ay
Gu
at e
ma
la
Re
p.
Do
m.
Ec
ua
do
r
Ho
nd
ur
as
Pa
rag
u
Br
az
il
Pe
ru
via
Bo
li
Ar
ge
nti
na
0
8
: WBG Firm Survey 2006
Where is the problem? National or Sub-national level?
Municipal license is about
70% of total process
1.
2.
3.
4.
5.
6.
7.
8.
9.
Verificar o nome da firma
Pagar direitos de registro
Registrar-se na câmara de Comércio
Registrar-se para taxas federais
Registrar-se para taxas estaduais
Conseguir autorização estadual para emitir recibos
Inscrever-se no registro municipal de contribuintes
Pagar taxa de fiscalização do estabelecimento
Conseguir autorização municipal para emitir
recibos
10.
11.
12.
13.
14.
15.
Imprimir recibos
Solicitar licença de funcionamento
Inspeção da autoridade municipal
Abrir um fundo especial de desemprego no banco
(FGTS)
Inscrever empregados no programa de integração
social
Notificar o ministério de emprego
9
Variation in Time and Cost for Operating License
Time
Vitória
Porto Alegre
Maceió
Campo Grande
Florianópolis
João Pessoa
Londrina
Recif e
Teresina
Joinville
São Luis
Goiânia
Salvador
Duque de Caxias
Aracaju
São Paulo
Cuiabá
Curitiba
São Bernardo do Campo
Diadema
Fortaleza
Belém
Belo Horizonte
Manaus
Guarulhos
Cost
18
31
32
32
32
32
32
32
34
34
38
41
47
56
58
61
62
62
72
75
86
104
111
123
210
0
50
100
150
Dias
200
250
Porto Alegre
Diadema
Londrina
Cuiabá
São Bernardo do Campo
Belo Horizonte
Curitiba
Guarulhos
Joinville
Florianópolis
Manaus
Campo Grande
São Paulo
Vitória
Duque de Caxias
Aracaju
Goiânia
João Pessoa
Fortaleza
Maceió
Salvador
Teresina
Recif e
Belém
São Luis
0%
1%
1%
2%
2%
3%
3%
3%
3%
3%
4%
4%
5%
5%
5%
5%
6%
7%
7%
7%
8%
8%
8%
9%
9%
0%
2%
4%
6%
8%
10%
Cus to (com o % do PIB pe r capita)
Source: Municipal Scorecard, 2007
10
Business Enabling Environment Program in LAC
Why work at the local level?
Because many of the main problems are due to poor
local implementation :
• Inspections
• Commercial Registry & Operating Permits
• Building Permits
• Transparency in public procurement
• Environmental Regulation
With decentralization, sub-national regulation will
only increase in importance.
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Methodology for Sub-national simplification
Implemented with agencies involved
• Diagnostic (time and motion study)
• Process simplification proposal
• Implementation
• Monitoring and Evaluation and
Continous Improvement
12
Simplification: A 4-Phase Process
Step 1: Diagnosis
 Conduct detailed analysis and mapping of existing
regulatory processes
 Conduct legal analysis of applicable laws, by-laws
& regulations
 Examine ability of municipality’s regulatory policy
to maintain effective implementation and balanced
enforcement of simplification initiative
 Remember to consider ancillary processes (e.g.,
inspections) as well
13
Simplification: A 4-Phase Process
Step 2: Reform design
 Design a simplified regulatory process and ensure
municipality can support technological requirements
 Examine requirements of existing process and
reduce requirements to minimum number necessary
 Document results in “process map” A Visual
representation of workflow; illustrates document
requirements, how it is submitted and what happens
during course of processing.
Must be done in conjunction with agency – no
parachuting consultants!
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Simplification: A 4-Phase Process
Step 3: Implementation
 Training, Training, Training – Give staff the tools to
better serve the public.
 Empower people to make necessary decisions – push
decision making down, with responsibility.
 Align Incentives - Institute client feedback systems
and public-private oversight boards focusing on key
results, and reward staff accorgingly.
15
Simplification: A 4-Phase Process
Step 4: Monitoring, Evaluation and continuous
improvement
 Ensure strong baseline data – without this you do not
know what you have done.
 Invite 3rd party scrutiny - including academic and
public-private oversight.
 Review continuously for improvement opportunities –
install active and continuous learning culture.
 Apply lessons to other areas.
16
Real Results in Operating License Reform
Average Results to date:
• 85% faster processes
• 300% growth in licenses
• 30,000 more firms registered
700%
Increase in licensed firms
600%
500%
400%
300%
200%
100%
0%
Nicaragua (León,
Honduras*
Peru (Lima)
Peru*
Granada y Masaya) (Tegucigalpa & San
(Arequipa, Ica)
Pedro Sula)
Honduras results f or 9 mths, Peru (Ica & Arequipa) f or 3months
Source: BEE Municipal Database
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Institutionalizing Sub-national Reform
Since sub-national governments are autonomous, you
need a five-step approach to build a market for reform:
• Provide high-profile pilot case
• Provide proven methodology and make it
available
• Create local capacity (build consulting capacity)
• Provide information (high profile public ranking)
• Have beneficiaries (private sector) lead
discussions with their governments.
Current IFC Program:
• 8 Countries/60 municipalities
• 6 National or State Programs
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Municipal Scorecard: Instilling Competition for good governance
Making information is available to Municipalities,
Government and the Private Sector
Regional Report
Country Report
Municipal Report Card
Reporte Perú
Reporte Perú
MSC 2008 will expand to 10 countries and add variables on:
•Paying (Local) Taxes
•Municipal Procurement (Pilot)
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How to Prioritize what to improve ?
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Thank You
Servicios de Asesoría – Latinoamérica y el Caribe
Programa de Mejora del Ambiente de Negocios.
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