Deregulation Concept

2

Overview of Regulatory Environment

Doing Business 95. Philippines

96. Ukraine – out of 189 97. Bahamas

Economic Freedom 161. Burma

162. Ukraine – out of 178 163. Bolivia

Ukraine in World Economic Ratings

2010 2011 2012 2013 2014 2015

142 145 152 137112 96

162 164 163 161 155 162Doing BusinessEconomic Freedom

7-10 thousands of

regulations and legal acts

Duplicative

Expensive

Inconsistent

Redundant

Inefficient

Corruptive

Burdensome

SME-unfriendly

Ukraine loose up to $Xbln of investments due to unfavourable regulatory environment

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II. Why NOT Guillotine?

Key arguments: Significant amount of already harmonized with EU

legislation, and documents that have to be amended, but not abolished in full.

Other international obligations in WTO, Association agreement, continuous work on visa regime liberalization etc.

Impossibility to proper distinguish already harmonized legislation from non-harmonized, critical from non-critical

Risks for UA export to EU and other markets due to lack of control for product safety, while DCFTA starts on 1st of January 2016

Guillotine approach is opposite to EU practice, where regulation created by legislation and not by the court system

Absence of efficient and independent judicial system, that will allow efficiently protect consumer interests (similar to USA system) makes technically impossible to realize the reform in the way of guillotine

High risk of increase of corruption in case of absence of regulations

Deregulation is not an abolishment, but implementation of more efficient regulation

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III. Deregulation Reform Vision and Scope

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1.2 Decreased number of regulations, permits etc.1.3 Decreased number of inspection bodies1.4 Create transparent, predictable, limited inspection purposes

2.1 Strengthen the State Regulatory Service function by put in place necessary staff and training them for the best-practices2.2 Implementation of RIA, Small business test, peer analysis and other relevant tools on the way of legal act approval for CMU and ideally parliament

3.1 Technical regulation and Food Safety systems are aligned with EU and mutually recognized

3.2 Market surveillance system harmonized with EU

3.3 International trade regulation simplified and harmonized with DCFTA and WTO requirements

1. Radically decreased number of regulations, inspections,

purposes for contact between business and authorities and

its administrative cost

2. The barriers on creation of new excessive and

economically baseless regulations strengthened

3. Efficient regulatory environment created and

functioning

TOP-30 regulatory environment in the world in 2020 for:

• SME business development

• Increase of FDI and capital investments

• Healthy market competition

2.3 Authorities trained to produce qualitative RIA documents

ULTIMATE GOAL STRATEGIC GOALS OPERATIONAL GOALS

3.5 Developed concept and legal framework for self-regulatory organization creation

3.4 Enabled electronic communication between business and authorities

3.6 Regulations switched to the market-regulation mode, where possible

1.1 Strengthened the institutional capacity of government by creating Better Regulation Delivery Office

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III. Deregulation Reform Implementation Approach

All

proc

esse

s ha

ve to

go

sim

ulta

neou

sly

Sectorial review of regulative

environment by BRDO

Avoid the creation of new excessive

regulation

Continue selective deregulation

according to CMU plan

• Strengthen State Regulatory Service (SRS) function by effective implementation of new approaches (Risk-based regulations etc.) and checking new regulations:

1) on the compliance with EU rules and/or world best-practice2) on the reasonability from cost-benefit point of view

• Adopt amendments to the parliament order with the same approach

Develop market and self-regulatory abilities

• Continue implementation of CMU plan and other deregulative initiatives

• Properly monitor, coordinate and support the process through created Deregulation Reform Team that consist of deputy ministers, MPs, experts, NGOs, donors

• Form the concentrated “portions” of the initiatives and then actively support them from PR/GR side, including negative publicity of the sabotage cases .

• Use “Better Regulation Delivery Office” (BRDO) that consist of lawyers and economists for comprehensive review of all state regulations in selected industry/area and ensuring the document drafting and follow-up. It is also to become an expert center on regulations for building Better Regulation in other spheres meanwhile

• Create Concept and Legal framework that unlock the creation of self-regulatory organizations

• Review the world best-practice and create the list of spheres, where government regulation can be transferred to the market and initiate such changes

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• Sectorial approach • Focus on spheres sensitive for SMEs • Cooperation with government, business and civil

society• Cross-cutting review of regulations in all legislative

acts (tree-method) • RIA and other relevant mechanisms to evaluate the

necessity of the legal acts• Dividing regulatory legislative acts into 3 groups: to

keep, to abolish, to amend• Expertise on alignment with DCFTA and WTO

requirements• Pro-active reform promotion and PR/GR

IV. Better Regulation Delivery Office ConceptBRDO Goal is to:

• Reduce cost and complexity of doing business• Reduce corruption factors• Prepare for implementation of the EU DCFTA• Build capacity for better regulation

Key Points:

Main Deregulation Reform Task-Force Independent team Tangible results already in 2015

Oleksiy GoncharukHead of BRDO

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Market Surveillance and Control

Bodies

IT & Telecoms

International trade

Retail Electricity & Utilities

Construction Food & Agriculture

IV. BRDO Focus

7 Sectorial Groups

In each Sectorial Group:1 Chief Lawyer/Analyst

• 5 Lawyers• 4 Analysts DCFTA Expert (part

time)

Spheres and industries that are sensible for SME

Approved by

International

partners a

nd

donors

BRDO≈70 experts

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StepsProcess descriptionState

authorities Civil society Businesscommunity

Governmental committee on European integration (or new Deregulation Committee)

Cabinet of Ministers of Ukraine

Verkhovna Rada

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6

7

Forming BRDO team which consists of director, 7 sectoral external expert groups (~ 5 lawyers, 4 analysts, 1 chief lawyer\analyst per group)

BRDO reviews all sectoral regulatory acts (laws, resolutions, regulations etc.), receives proposals from civil society and business community and splits it by 3 groups of acts: to be abolished, to be changed, to be kept

BRDO drafts needed changes into the legislation and transmit to Deregulation Board for the approval

1

2

3

The Committee reviews and approves the draft laws, regulations etc.• Head of the Committee – Prime Minister• Deputy Head – Minister of Economy

The CMU reviews and do final approval for the draft laws, regulations ect

Rada reviews and do final approval for the draft laws, regulations

MEDT 4 MEDT transmits draft laws, regulations etc. to Governmental committee

CMU resolution on: changes to «Reglament» which simplifies submission of draft laws to Governmental committee with less approvals. Approved on 16 of Sep.

IV. General Process Description of BRDO

Deregulation Board Key experts + State Regulatory Service + MEDT

Better Regulation Delivery Office (BRDO)

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V. First Stage of Deregulation: Execution StatusStatus of the 1st stage of Deregulation Completion of CMU 357-R Act by

AuthoritiesThere’re 212 initiatives, out of which 70 was completed before forming official Deregulation Plan (CMU Act 357-R) that consist of 142 tasks*. Majority of tasks has to be done until Q4 2015, full list – until Q3 2017.

Main executors of the Act are MEDT (39 tasks), MinAgro (16), MinEcology (12), MinRegion (11), MIA (9). Majority of the tasks to be completed in 3Q-4Q 2015

* - officially 131, but some of the points contain several different docs

All task

s

Completed

Submitte

d to V

RU

Submitte

d to C

MU

Appro

val s

tage

In progr

ess

Not star

ted

Startin

g date no

t 0

50

100

150

200

142

70

22

15 5

46

46

5 3

SRS

NEURCU

MinEnergy

MinInfra

EnergoEffAgency

AntiTrustCom

MinSoc

MinFin

MinHealth

MinJust

NKRZI

ALL

AdmStateSpecTelecom

MIA

MinRegion

MinEcology

MinAPK

MEDT

0 5 10 15 20 25 30 35 40

0

0

1

0

0

1

0

0

0

1

1

0

0

1

3

4

2

8

completed

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V. First Stage of Deregulation: Several Examples

Initiatives Results“UkrEcoResursy” Monopoly of State-owned enterprise UkrEcoResursy on the package utilization

market liquidated Economical effect is 5-7 bln UAH until 2020

Decreased number of licences

Shortened the number of businesses that require the license from 56 to 30 Updated the list of licenses issuers (24 bodies)

Liberalized seaport procedures

Chemical control of segregated ballast cancelled Automatic radiological control put in place Ecology declaration cancelled Inspections joined

Obligatory certification cancellation

Obligatory certification for 16 product group cancelled Certification fro new automobiles abolished, come into force from 2016 Defined the roadmap of full abolishment of obligatory certification and

shifting the system to market surveillance, harmonized with EU legislation Quarantine certificate for grain and oil seeds cancelled Phytosanitary certificates issuing period shortened to 24 hours

E-Commerce law Electronic transactions are now equal to paper transactions Consumer protection covers electronic transaction Electronic signature legalized in B2C relations

Business-ombudsman office Business-ombudsman office created and functioning

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V. Pipeline of Initiatives – Several examplesInitiatives ResultsPublic Administration reform2 Draft Lawsfinal stage of approvals

Draft Law (DL) on List of AdminServices. • decrease number of services from 3000 to approx 450 (abolishment of intermediate

services, deduplication, services that doesn’t have sufficient legal base). • create the basis for electronic way of providing services.

DL on AdminServices system • harmonize and specify legislation in this sphere.

Reform of controlling bodies3 Draft Laws (2531а, 2418а, 3153a)Approved by parliament committee

2531a:• Create the financial responsibility of the inspector for illegal actions• Form the base for integral public database of inspection body plans and actions• Decrease the number of inspections• Focus inspectors on risky businesses

2418:• Liberalize the system of state control

3153a: • Provide temporary moratorium for inspections that buys time for the reform

Licenses and permits3 Draft Laws (2498a, 2558а, 3rd DL)2 approved by parliament committes, 1 - On final stage of approvals

2498a:• Abolish 4 licenses for export/import of alcohol and tobacco

2558a• Cancel, shift to declarative way or optimize the receiving of 22 permits in Agro sector

DL:• Cancel, shift to declarative way or optimize the receiving of more than 30 permits in

different areas

AntiTrust legislation3 DL (2431, 2168a, 2102)Registered in parliament

DLs focused on increase of transparency, predictability and deregulation for SME

Electricity marketDL under development

DL create the principle of “standard connection” that significantly decrease the price and duration of the connection to the electricity network

Improve Ukrainian position in Doing Business rating

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VI. Barriers for New Regulations

1

2

3

4

Regulatory Impact Analysis Upgrade

Small Business Test Implementation

State Regulatory Service Strengthening

VRU “reglament” improvement

Area Influence

RIA provides systematic evaluation of the potential impacts of a new regulation in order to assess whether the regulation is likely to achieve the desired objectives

Small Business Test is widely used instrument for assessing the costs and benefits of new regulations, which is now implementing by SRS

At the moment VR reglament requires only formal regulatory impact analysis of new draft laws

SRS has limited tools for qualitative regulation policy implementation

Obligatory and more specific RIA , based on quantitative analysis, will show not only general quality of regulation, but particular drawbacks and damage, so it may prevent regulation from being implemented

Estimation of the overall cost for SMEs of new regulations, if excessive, can dissuade legislators from regulation and gives SRS an excuse to veto

More efficient analysis of the regulatory acts and more ability to work with the business society

Using RIA and Small-business test by parliament can provide quantitative evaluation of draft laws to improve their quality

The Methodology upgrade is already in approval stage

The most complicated issue

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VI. Self-Regulatory Abilities and Market RegulationDevelop the concept of self-regulation for Ukraine

Create legal framework for Self-regulatory organizations creation and functioning

1. More professional and business-friendly regulation of the markets

2. Improve the customer protection and quality of the products/services for the consumers

3. Decrease budget spendings

! Targets to achieve:

1. “Privatization of corruption”2. Market monopolization3. Lack of control in critical spheres

! Risks to avoid:

To be started in October 2015

Create the list of initiatives for: • switching state regulation to the

market• demonopolisation of the state

services

Draft legal acts together with the market players

Examples:

1. Pass automobile tech inspection function to insurance companies

2. Pass fire inspection function for new buildings to insurance companies

3. Open market for private railway transportation

4. Open market for private marriage registration

1

2

1

2

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Team functionsTeam Composition

Key ministries representatives

Civil society

Business community

1. Supervision of the overall reform progress

2. Monitoring of the fulfillment of the Deregulation plan

3. Work coordination on Deregulation plan and other deregulation initiatives

4. Gathering, approving and supporting the deregulation initiatives from the participants and business/expert community

5. Monitoring of the Better Regulation DeliveryOffice activity

6. Document-flow control and support during approval process (CMU, parliament)

7. Coordination of information policy, PR/GR support to the reform

VII. Deregulation Reform Team

Pro-european parliamentary group representativesVictor Galasyuk – Radical Party, Head of parliament committeeOleg Ivanchuk – People’s Front, Head of parliament committeeOleksiy Poroshenko – Bloc of Petro PoroshenkoSerhiy Kiral – Samopomich (self-help)Oleg Ryabchin – Bat’kivschina (motherland)

Reanimation Package of ReformEasyBusinessNew CountryKyiv School of Economics

European Business AssociationBusiness Ombudsman

Ministry of EconomyMinistry of FinanceMinistry of JusticeState Regulatory ServiceMinistry of Agrarian PolicyMinistry of InfrastructureMinistry of Regional PolicyService of Customers protection

Donors representatives

Deregulation Reform Team = Reform Management Board

Resu

ltsDe

regu

latio

n

Number of cancelled regulatory acts, permissions etc

EU Directives on Technical Regulation adopted

Law amended to introduce electronic permits

Changes in Laws on Administrative Services and Permits system

Improved positions in the Doing Business rating

Execution of the Plan of the priority deregulation (131 items)

Decreased number of inspection bodies

Action plan for immediate deregulation signed

OUTPUT:PROCESS:OPERATIONAL: PERCEPTION:

80% GREEN7% YELLOW13% RED

Framework for delegation of state functions to the market and self-regulatory organizations

Changes in business expectations index

Law on Register of Administrative Services

30%PROGRESS IN

H1 2015

100% 8%

Methodology and application of Regulatory assessment procedure reviewed 0%

0%

0%

25%

0%Full inventory audit of regulatory acts

20%

20%

0%

Current status of reform implementation - 30% (in line with expectations).● The plan for deregulation of the agricultural sector and regulatory benchmark simplification has been

approved and implemented.● Due to a significant number of items that require law amendments which have been effectively

passed in April, the main results are expected in H2 2015. This creates some risk for meeting the deadlines. Another significant risk is the high dispersion of responsibility among participants and lack of coordination and control of the plan implementation.

● The Framework for comprehensive deregulation and its action plan were developed recently and are currently in the approval stage. It is expected that the approval process will be finalized in July and it will launch the next phase of the deregulation process.

● The positive news are in the Administrative Services field: bills are in the final stages of development or even approvals by central government bodies. In addition, very productive work is visible in the technical regulation sphere: legal basis and infrastructure are being developed, the process of EU Directives on technical regulation, which is a pre-condition for the signing of the ACCA agreement, are being adopted actively (89% of 2015 plan). The standartization sphere, caused by the difficult financial situation of the National standartization body, that has just started to recover its activity after change in management.

On scheduleDelaySubstantial delay

ASSESSMENT

OF THE NGO, MINISTRY

AND

PROJECT OFFICE

Monitoring procedures for the Action plandeveloped 100%

Comprehensive deregulation Framework and Action plan approved

30%Monitoring procedures for the comprehensive deregulation defined

0%

Law on Technical Regulations Directives

100%Independent metrology and standartization bodies in line with EU legislation

100% АСАА agreement signed

100%

89%

Number of new standards adopted in compliance with the EU regulation

E-Database of standards

1%

0%