BETTER REGULATION SERIES Vol. 3 by World Bank in Bulgaria

BETTER REGULATION SERIES

Vol. III

Bulgaria

EX-POST IMPACT ASSESSMENT

of the Act on Limiting Administrative Regulation and Administrative Control on Economic Activity

JULY, 2010

Europe and Central Asia Region Private and Financial Sector Development Department

Report No. 55728-BG

BULGARIA Ex-Post Impact Assessment

of the Act on Limiting Administrative Regulation and Administrative Control on Economic Activity

III

Vol. July, 2010

THE WORLD BANK PRIVATE AND FINANCIAL SECTOR DEVELOPMENT DEPARTMENT CENTRAL EUROPE AND THE BALTIC COUNTRIES EUROPE AND CENTRAL ASIA REGION WASHINGTON, DC

© 2010 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved 1 2 3 4 13 12 11 10 Manufactured in the Republic of Bulgaria First printing: November, 2010 Report No. 55728-BG This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. In case of any discrepancies, the English language of the report “Ex-Post Impact Assessment of the Act on Limiting Administrative Regulation and Administrative Control on Economic Activity” will govern. The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. Cover design by Boris Balabanov

Currency and Equivalent Units (Exchange rate effective July 12, 2010) Currency Unit=Bulgarian Lev (BGN) EUR 1=1.95583 US $ 1=1.5557 BGN FISCAL YEAR 1 January – 31 December WEIGHTS AND MEASURES Metric System

Vice President: Country Director: Sector Director: Sector Manager: Task Team Leader:

Philippe H. Le Houerou, ECAVP Peter C. Harrold, ECCU5 Gerardo Corrochano, ECSPF Lalit Raina, ECSPF Evgeni Evgeniev, ECSPF

ABBREVIATIONS AND ACRONYMS APC ARC BEEPS BNB BULSTAT CEG CEM CoM CRC DCoM EC ECSPF ESC EU FSC GDP IMD IO IPAEI LARACEAA LEG LP MAF MEYS MC MF MJ MH MI MLSP MOEW MRDPW MSAAR MTITC NAMRB NAVET NRA NRP NRR NSRF NSSI OECD OPAC PPP RIPHPC SCEWR SG SL SMEs UK USAID WEF

Administrative Procedures Code Administrative and Regulatory Costs Business Environment and Enterprise Performance Survey Bulgarian National Bank Unified Identity Code under the Unified Register for Identification of Economic and Other Subjects in the Republic of Bulgaria Council for Economic Growth Council for Electronic Media Council of Ministers Communications Regulation Commission Decision of the Council of Ministers European Commission Finance and Private Sector Development Department at the World Bank Economic and Social Council of the Republic of Bulgaria European Union Financial Supervision Commission Gross Domestic Product Institute for Management Development Information Obligation Institute of Public Administration and European Integration Limiting Administrative Regulation and Administrative Control on Economic Activity Act Law on Electronic Governance Legal Person Ministry of Agriculture and Food Ministry of Education, Youth and Science Municipality Council Ministry of Finance Ministry of Justice Ministry of Health Ministry of Interior Ministry of Labor and Social Policy Ministry of Environment and Water Ministry of Regional Development and Public Works Ministry of State Administration and Administrative Reform Ministry of Transport, Information Technology and Communications National Association of Municipalities in the Republic of Bulgaria National Agency for Vocational Education and Training Nuclear Regulation Agency National Reform Program The Board of Swedish Industry and Commerce for Better Regulation National Strategic Reference Framework National Social Security Institute Organization for Economic Cooperation and Development Operational Program "Administrative Capacity" Public-and-Private Partnership Regional Inspectorate for Public Health Protection and Control State Commission on Energy and Water Regulation State Gazette Spatial Law Small and Medium-Sized Enterprises United Kingdom United States Agency for International Development World Economic Forum

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TABLE OF CONTENTS ACKNOWLEDGEMENTS ................................................................................................................... vii EXECUTIVE SUMMARY ................................................................................................................... viii

CHAPTER I INTRODUCTION .................................................................................................................................... 1 1.1 Importance of the LARACEAA .................................................................................................... 1 1.2 Scope of the Assessment ............................................................................................................... 2 1.3 Sources of Information .................................................................................................................. 2 1.4 General Limitations of the Analysis .............................................................................................. 3 1.5 Structure of the Report .................................................................................................................. 5 CHAPTER II BACKGROUND OF THE ASSESSMENT ........................................................................................... 6 2.1 Policy Framework ......................................................................................................................... 6 2.2 Goal and Objectives of the Act ..................................................................................................... 9 2.3 Performance Indicators of the Assessment ................................................................................. 10 CHAPTER III EX-POST IMPACT ASSESSMENT OF THE LARACEAA ............................................................ 13 3.1 Government Measures and Initiatives ......................................................................................... 13 3.1.1 Administrative and Regulatory Burden-Reduction Measures ........................................... 13 3.1.2 Institutional Initiatives ....................................................................................................... 16 3.1.3 Conducted Impact Assessments, Analyses and Trainings ................................................. 18 3.1.4 Legislative Initiatives ........................................................................................................ 19 3.2

Status and Dynamics of Quantitative Indicators ....................................................................... 19 3.2.1 Outcome Indicators ........................................................................................................... 19 3.2.2 Output Indicators ............................................................................................................... 24 3.2.3 Results Indicators .............................................................................................................. 25

3.3 Status and Dynamics of Qualitative Indicators ........................................................................... 29 3.3.1 Achievement of the LARACEAA Objectives: Results from Survey Findings .................. 29 3.3.2 Case Studies of Regulatory Regimes at the Local Level .................................................... 30 3.4 Summary of Quantitative and Qualitative Analyses ................................................................... 31

TABLE OF CONTENTS CHAPTER IV MAIN PROBLEM, DRIVERS AND EFFECTS OF THE PROBLEM, AND RECOMMENDED AMENDMENTS TO THE LARACEAA ............................................................................................. 34 4.1 Underlying drivers of the problem (“roots of the tree”) .............................................................. 34 4.2 Effects of the problem ................................................................................................................. 36 4.3 Key Recommendations for Amendments to the LARACEAA ................................................... 37 REFERENCES ....................................................................................................................................... 39

APPENDICES ........................................................................................................................................ 41 Appendix 1: Licensing Regimes’ Compliance with the Requirements of the LARACEAA .................. 41 Appendix 2: Information on the Status of Regimes under the Better Regulation Program (2008-10) ................................................................................................................................... 43 Appendix 3: Implementation of the Measures Under the Better Regulation Program (2008-10), as of April 2009 .......................................................................... 47 Appendix 4: Survey Questionnaire to Stakeholders................................................................................ 51 Appendix 5: Analysis of Stakeholders’ Replies to Survey Questionnaire .............................................. 56 Appendix 6: Review of Regulatory Regimes at the Local Level ............................................................ 59 Appendix 7: Licensing Regimes and Existing Registers as per LARACEAA Requirements ................ 66

TABLE OF CONTENTS Table 1: Table 2: Table 3: Table 4: Table 5:

Performance Indicators of the LARACEAA's Ex-post Impact ............................................. 11 Improvement of Bulgaria’s Doing Business Ranking Since 2004......................................... 21 Achievement of the LARACEAA Objectives (in percent) ................................................... 30 Allocation of Reviewed Regimes by Municipalities ............................................................. 31 Summary Matrix of State and Dynamics of Quantitative Performance Indicators ............... 31

Figure 1: Escalator of Regulatory Regimes....................................................................................... 6 Figure 2: Small number of licensing regimes amended since 2003 ..................................................... 15 Figure 3: A few licensing regimes introduced and very few abolished since 2004 ............................. 15 Figure 4: Bulgaria’s Global Competitiveness Index ranking is low and not improving ...................... 20 Figure 5: Bulgaria’s ranking by the Competitiveness Index of IMD slightly improved ..................... 20 Figure 6: Bulgaria’s relative ranking by the Doing Business Index improves ..................................... 22 Figure 7: Bulgaria takes 44th position as per Doing Business 2010 ranking ....................................... 22 Figure 8: Bulgaria’s Product Market Regulation Index compares well with EU-average ................... 23 Figure 9: Bulgarian Firms do not rate Business Licensing and Permits as one of the top constraints in 2009 (in percent) ............................................................................................................. 23 Figure 10: Share of companies showing regulation as the most significant restraint to business in 2009 (in percent) ............................................................................................................................... 24 Figure 11: Decreasing values of WEF’s Burden of Government Regulation and Efficiency of Legal Framework since 2003 and Transparency of Government Policymaking since 2007 ............ 26 Figure 12: Bulgaria’s Burden of Regulation is falling as per WEF relative ranking, while Bulgaria’s Efficiency of Legal Framework and Transparency of Policymaking are somewhat constant .............. 26 Figure 13: IMD Indices for Bulgaria of Bureaucracy, Ease of Doing Business and Starting a Business are somewhat similar in 2009 compared to 2006 .................................................. 27 Figure 14: IMD’s Bulgaria Ranking of Bureaucracy is Worse Than Starting a Business and Ease of Doing Business ................................................................................................... 27 Figure 15: Time Spent by Senior Managers of Manufacturing Firms in Dealing with requirements of Government Regulations in Bulgaria dropped substantially in 2009 compared to 2007 ...................... 28 Figure 16: Bulgaria has better standing vis-à-vis other countries in Europe and Central Asia Region regarding Days to Obtain Operating License in 2009 (in percent) ................................... 29 Figure 17: Problem Tree ...................................................................................................................... 37 Box 1: Establishment of a Pilot Integrated System of an Electronic Region ........................................ 16

ACKNOWLEDGEMENTS This report is prepared within on-going World Bank’s Analytical and Advisory support in the area of regulatory reform to the Bulgarian Government in collaboration with the Ministry of Economy, Energy and Tourism. The World Bank team was led by Evgeni Evgeniev, Private Sector Development Specialist, Finance and Private Sector Development Department (ECSPF) and included experts from Club ‘Economika 2000’ (think tank, based in Sofia), consisting of Spartak Keremidchiev, Stefan Ivanov, Borislav Tafradjiyski, and Maria Georgieva (all Economists), and Valchin Daskalov (Lawyer). Julian Nikolov, Director of the Economic Policy Directorate at the Ministry of Economy, Energy and Tourism (since December 2009) and Eli Anavi, former Director of the Enterprise Policy Directorate and now Head of the Innovation, Entrepreneurship and Business Environment Division at the Ministry of Economy, Energy and Tourism and their team, collaborated closely with the Bank team since inception of the task and provided strategic guidance at all stages of the work. The World Bank team would like to thank also the participants at the Better Regulation Group Working Meeting in January 2010 who provided useful feedback to the preliminary findings of this report. Anne T. John, Marga O. De Loayza, Nikolinka Ivanova and Vessela Stambolyiska, all from the World Bank, provided precious technical support. Thank goes also to John Felton, who provided edits to previous versions of the report. This report is also a result of the devoted work of the translator, Maria Georgieva, who made its final Bulgarian version possible. The report was prepared under the general guidance of Theodore O. Ahlers (Country Director for Bulgaria since May 15, 2009) and Peter C. Harrold (Country Director for Bulgaria since January 25, 2010), Fernando Montes-Negret (Sector Director, ECSPF until December 21, 2009), Gerardo Corrochano (Sector Director, ECSPF since February 15, 2010) and Lalit Raina (Sector Manager, ECSPF). Florian Fichtl (Country Manager for Bulgaria) provided strategic guidance to the team during the process of consultation with public and private actors and contributed with valuable comments on earlier drafts. The team would like to specifically thank John Daniel Pollner (Lead Financial Officer, ECSPF) for reviewing earlier drafts of the report and providing helpful comments and suggestions. Sereen Juma (Sr. Country Officer, ECCU5), Rosalinda Quintanilla (Lead Economist) and Stella Ilieva (Senior Economist) from the World Bank have also been supportive with their comments on an earlier draft. The World Bank team is also appreciative of the feedback received during the July 6, 2010 public meeting of the Council for Economic Growth, chaired by H.E. Traycho Traykov, Minister of Economy, Energy and Tourism, and of the support of colleagues from line ministries and public agencies in Bulgaria, of their willingness to share information and valuable insights. Peer reviewer of the report was Marc Reichel (international expert on administrative barriers).

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EXECUTIVE SUMMARY The Ex-post Impact Assessment of the Limiting Administrative Regulation and Administrative Control on Economic Activity Act (LARACEAA) is part of the World Bank’s support to the Government of Bulgaria through on-going Analytical and Advisory work in the area of regulatory reform. This is the fourth report in the course of three years of World Bank Analytical and Advisory support to the Government of Bulgaria on regulatory reform. The first joint World Bank and Ministry of Economy and Energy report analyzed administrative procedures in three sectors of the economy—tourism, food, and road transportation—calling for reduction and simplification of certain administrative regimes that are burdensome. It emphasized superfluous regulation at the municipality level as well. Another report, Bulgaria’s Policy for Regulatory Reform in the European Union: Converging with Europe’s Best Regulatory Environments, recommended a national nine-step strategy that was approved by the Council for Economic Policy on October 19, 2007. These two reports, and the consultation process with other line ministries, business associations and think tanks, actually paved the way for the Better Regulation Program 2008–2010, approved by the Bulgarian Government in April 2008. Another World Bank report from June 2009 called for a systematic, fair, and transparent regime of state fees. The World Bank has also prepared a report on Administrative and Regulatory Barriers to Business in Bulgaria. The purpose of the present ex-post impact assessment of the LARACEAA is to: (i) assess how the Act has been enforced, (ii) identify and estimate the impacts of the Act, and (iii) provide recommendations for amendments to the Act. Chapter I emphasizes the importance of the Act as part of the Bulgarian Government’s role in advancing regulatory reform and improving the business environment; gives the scope of the assessment and presents the sources of information utilized; and delineates general limitations of the analysis. Chapter II outlines a policy framework by discussing coherence with the Governmental and European Union (EU) policies, as well as touching upon relevant documents on regulatory reform, followed by analysis of the goal and objectives of the Act, and identification of performance indicators for the measurement of the impact of the Act. Chapter III depicts the results of the ex-post impact assessment, while the final Chapter IV identifies the main problem; discusses underlying drivers and effects of the problem; and proposes recommendations for amendments to the Act.

Main Findings Major Problem Identified: Broad state intervention in economic activities as manifested by the presence of a large number of regulatory regimes introduced by special laws that result in reduced transactional efficiency and competitiveness of the economy. The Assessment is based on quantitative and qualitative analyses. This report uses a set of quantitative indicators to measure the impact of the Act and the achievement of its goal and objectives for the period after its entry into force in 2004 until end-2009. General limitations of the analysis are identified, including the specificity of the Bulgarian legal system, the lack of an ex-ante assessment of the Act, impact of the EU accession process, and the lack of a performance monitoring system of the regulatory and administrative burdens. The study is complemented by a qualitative analysis to overcome the hurdles in performing the assessment (e.g. case studies of regulatory regimes at the local level; survey of public officials and other stakeholders; and analysis of the institutional, legal and policy environment).

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Results from Quantitative Indicators: 

Indicators showing the least improvement: Efficiency of the legal framework (e.g. in settling disputes or in challenging regulations) and transparency of policy-making.



Indicators showing progress: Overall burden of regulation (e.g. time spent by the senior management in dealing with regulations), bureaucracy (e.g. paperwork, unnecessary queuing or submission of documents by business), ease of doing business (e.g. business legislation in terms of openness, competition and regulations, labor regulations), among others.



Indicators showing the most improvement: Share of firms identifying business licensing and permits as major constraints, product market regulation index, number of regimes proposed for abolition or simplification, average number of days needed for the issuance of an operating license, among others. Results from Qualitative Indicators:



Transposition of EU regulations added additional administrative and regulatory burdens. Bulgaria’s accession to the EU and the rapid introduction of regulations stemming from the acquis communautaire during the period of analysis and evaluation exerted an influence over the condition and dynamics of business regulation. The regulatory and administrative burdens for businesses have increased as a result of the transposition of EU regulations in the Bulgarian legal system.



Partial achievement of the LARACEAA’s objectives. Survey analysis indicates that the LARACEAA’s objectives have been only partially achieved. Among the achieved objectives this report finds: (i) “Clear definition of the types of regimes regulating economic activity,” (ii) "Protect free economic initiative”, and (iii) “Clearly define the limits of administrative intervention in economic activity at central and local level.” However, a number of important objectives set out in LARACEAA have not yet been achieved, including: (i) “Increase transparency in the introduction of regulatory regimes,” (ii) “Reduce sources of corruption by limiting the discretionary power of administration,” (iii) “Secure publicity of the work of administrative bodies in applying normative acts related to administrative regulation and control on economic activity, as well as of the reasons for their change,” (iv) “Restricting and reducing publicly unjustified burdening of economic activity,” and (v) “Eliminate normative requirements that may reduce competition.”



Bulgaria’s Better Regulation Policy has not been carried out consistently and systematically; improvements have been slow. Therefore there are peaks and valleys in the results of regulatory reform. The level of national competitiveness is still low compared to other EU members and developed countries. However, the dynamic of most indicators displays slow tendency toward improvement.



Local authorities enforce unnecessary burdens on business and they do not make use of public registers. The case studies’ review of regulatory regimes enforced at the local level indicates that many of them evolve form national legislation, and thus do not constitute special initiatives by local authorities. The local authorities, however, collect available information and additional requirements that are not directly related to the decision for issuing a permit. The municipalities do not make use of public registers, which are required by the Act to publish decisions relating to the regulatory regimes. Some municipalities also enforce an illegal commercial establishment registration regime.

LARACEAA’s Main Issues Limited scope of the Act. The Act stipulates the main principles of regulatory impact by distinguishing between two types of regulations: (i) licensing and registration regimes, and (ii) separate deals or single actions that refer to individual deals. However, most regulation of business remains beyond the scope of the Act and is covered by the Administrative Procedures Code and other special laws. Limited application of the principle of “silent consent”. Art. 28 of the Act provides that this principle (which means that a business application is presumed to be approved unless it is denied within a certain period from an administrative body) relates to the issue of permits and certificates for individual deals or actions, unless otherwise provided by another law. The research found that, in general, special laws avoid the application of the principle of “silent consent.” In fact, only six laws apply this principle. Failure to perform ex-ante impact assessments of proposed regulatory regimes. No ex-ante impact assessment is ever made during the drafting and submitting of licensing and registration regimes. Such assessments are required by Art. 3, para 4, 5 and 6 of the Act. The Act also provided that the impact assessment should be published on the Internet or made public in another adequate way; this also is not the practice. Most of the 16 amendments to the Act refer to the introduction of new regulatory regimes and ex-ante impact assessments related to them have not been conducted. Inadequate institutional enforcement framework for the Act. The Act does not have an adequate institutional framework because it lacks an efficient sanction and control system to enforce compliance with it by the bureaucracy. Also, there is no united Administrative Register of regulatory regimes, and no administrative body "owns" the Act and has overall responsibility for its implementation and success. The Act’s Weak Enforcement has Negative Impacts High business costs. This is related to the procedures for businesses to apply for and obtain licenses, registrations, permits and certificates. It is also related to administrative regulation and control. The costs are both in terms of money paid in higher fees and time spent dealing with bureaucratic requirements. The high share of the informal economy is one result of heavy burdens imposed by administrative regulation and control. This implies losses in public welfare and demands greater public resources for control and sanctions on companies in the shadow economy. Non-transparency of administrative procedures. Companies that apply for licenses, registrations, permits or certificates do not receive adequate information on the course and progress of the procedures. In some cases, applications are not processed in the order they are received; some companies are given a decision before others who applied earlier. This creates possibilities for corruption. Worsened business climate. The weak enforcement of the Act discourages improvements in the country’s business climate; this is reflected in opportunity costs in terms of otherwise nimble investment activity and competitiveness of the economy. Key Recommendations for Amendments to the Act To address the inherent weaknesses of LARACEAA and the need to realize larger benefits from the Act, several recommendations for its amendment are put forward. A total of eleven amendments to the Act (see Table below) are recommended to: (i) improve its administrative provisions (instrumental amendments); (ii) strengthen its institutional support (institutional amendments); and (iii) introduce new rules for calculation of administrative fees (economic amendments).

KEY RECOMMENDATIONS FOR AMENDMENTS TO THE LARACEA ACT Instrumental amendments Introduction of new key principles of administrative servicing in the Act (e.g., avoidance of duplication of submission of identical documents to both central and local authorities) relevant to all relationships between businesses and the administration 2 Application of the principle of “silent consent” for registration regimes 3 Broad implementation of declarations of compliance by applicants, along with suitable mechanisms for verifying those declarations, instead of requiring official documents issued by a court or other administrative bodies 4 Establishment of a minimum time period during which an applicant for a license or permit can correct mistakes on the application 5 Improved oversight and control of the sanctioning mechanism within the administration and reduction of the burden on controlled entities 6 Introduction of instruments enabling an analysis of whether proposed regulatory regimes comply with the three groups of criteria under the LARACEAA (national and personal security, human and property rights, and environment) Institutional amendments 7 Establishment of a unit within the Council of Ministers Administration that would oversee implementation of the Act and impose sanctions when public administration officials violate it 8 Establishment of a uniform Administrative Register of regulatory regimes to provide easily accessible information and advice on all procedures and required documents to all clients Economic amendments 9 Introduction of additional principles for setting charges for administrative services 10 Regulation of the amount of the charges on the basis of adopted rules 11 Introduction of the principle "one procedure – one charge." Surcharges should be prohibited when additional actions are required for an applicant to correct mistakes or as an incentive for administrative officials to perform their jobs 1

The recommendations listed above may help the Bulgarian authorities use the LARACEAA to further advance regulatory reform. But they should proceed in parallel with other actions under the Better Regulation Program and related initiatives. An improved Act can become a powerful means of reform only if it is part of those broader efforts and has political support at the highest levels.

CHAPTER

I INTRODUCTION

The first chapter emphasizes the importance of the Limiting Administrative Regulation and Administrative Control on Economic Activity Act (LARACEAA) as part of the Bulgarian Government’s endeavours in advancing regulatory reform and improving the business environment; gives the scope of the assessment; presents the sources of information utilized; and delineates general limitations of the analysis. 1.1

Importance of the LARACEAA

Policymakers consider that the adoption of the LARACEAA is a significant step forward in the process of regulatory reform in Bulgaria. The Limiting Administrative Regulation and Administrative Control on Economic Activity Act (LARACEAA) was adopted in 2003 to facilitate and encourage economic activity by defining and placing publicly justified limits on the regulations and controls imposed on businesses by national and local government bodies. Policymakers consider that the LARACEAA is a substantial step forward in the process of regulatory reform in Bulgaria. In its current version (as of January 2010), LARACEAA is the result of sixteen amendments.1 Although the 2003 Act was modified from its initial draft, majority of experts and business leaders consider that the Act created the basis for a more conducive regulatory environment in Bulgaria. The initial draft of the Act was prepared by a team of lawyers and economists from the Bulgarian Small and Medium Enterprises Promotion Agency, the Institute for Market Economics, the Bulgarian Chamber of Commerce and Industry (BCCI), the Bulgarian Industrial Association, the Commission on Economic Policy to the National Assembly and the Ministry of Economy. The idea was to adopt rules restricting the unjustified intervention of state and local authorities into the activity of entrepreneurs and commercial companies. Some proposals in the initial draft were not included in the adopted version of the Act. These included such matters as, (i) considering the option of not introducing a regulation; (ii) the requirement for official exchange of information and documents among the institutions2; (iii) applying the principle of “silent consent” to regimes with no expedience (registrations); (iv) the possibility for the administration to authorize business associations to perform self-regulation, among others. Even so, the majority of experts and business leaders considered LARACEAA to be a statutory Act laying the basis for a more conducive regulatory environment in Bulgaria. LARACEAA stipulates two types of regulations. The Act specifies two types of regulations: (i) regimes regarding the performance of overall economic activity, and (ii) regulations regarding separate deals and the execution of single business actions. Some activities stipulated by the Act can be subject to a licensing regime, and other activities can be subject to the more liberal regime, defined by the Act as a “registration” regime. Overall, LARACEAA is a common Act setting clear rules for administrative bodies in exercising regulation and control of economic activity. The Act sets up clear rules related to

1 2

The LARACEAA is in force since December 18, 2003. This principle was introduced later on by amendment to the Law, SG 44/2009. 1

both the legislation and responsibilities of administrative bodies in exercising regulation and control on economic activity. In its most important provisions, the Act: i.

vi. vii. viii. ix.

Sets up the guiding principles of legislation and administrative procedure related to economic activity. Among these, the principles of economic freedom (proclaimed by Art. 19, Constitution), proportionality and legitimate expectations are of particular importance; Provides that all regulatory regimes and requirements for permits, certifications and notifications of separate deals and actions must be authorized by a law. It defines two types of regulatory regimes: licensing and registration; Introduces the requirement that regulations at all levels must be motivated by a clearly defined necessity (from the viewpoint of national security, environmental protection, or the personal and material rights of individuals), thus limiting the discretionary power of regulators; Introduces compulsory ex-ante economic analysis and impact assessment for each regulation, which must be made public, as well as a requirement for informing in advance those persons (stakeholders) who will bear obligations or restrictions by virtue of a new regulation; Limits the power of administrative bodies to require applicants to submit proof of circumstances which are certified before another administrative body and which are properly entered in a register; Defines the obligations of the administration in exercising its powers; Introduces the principle of “silent consent” for issuing permissions and certificates; Constitutes the main rules for executing control on business activities; Adopts a list of economic activities covered by a licensing regime.

1.2

Scope of the Assessment

ii. iii.

iv.

This report is a result of collaboration between the Government of Bulgaria and the World Bank. The ex-post LARACEAA report is part of a World Bank support to the Government of Bulgaria through an on-going analytical and advisory work in the area of regulatory reform. This collaboration contributed to Bulgaria’s recent progress in the field of Better Regulation. The purpose of this Assessment is to assess ex-post the impacts of the Act. The assessment determines the extent of effect on target groups, institutions, economic environment and the legal system. It also answers the question of whether and to what degree the realized impacts resulted directly from the adoption and implementation of the Act. The period covered for this report is from January 2004 when the Act entered into force through the end of 2009. The Assessment used both quantitative and qualitative methods of analysis. Data and information from different national and international sources has been collected and processed, coupled with a survey addressed to researchers, business representatives, and experts from public agencies and state institutions applying the Act. Results from analysis of the implementation of four exemplary regulatory regimes in three municipalities are provided as well.

1.3

Sources of Information

This report draws on international best practice guidelines. This ex-post assessment follows the January 2009 Impact Assessment Guidelines of the European Commission (EC). Best practices in impact assessment applied by international institutions and organizations, such as the Organization for Economic Co-operation and Development (OECD), the World Bank, the United States Agency for International Development (USAID), etc., were also studied. 2

Given that the EC guidelines are relevant mostly to ex-ante impact assessments, this study also considered the 2001 Guidelines of SIGMA (a joint initiative of the OECD and the EU, principally financed by the EU).3 The team also considered Regulatory Impact Assessment (RIA) guidelines, manuals and instructions developed in Bulgaria on the basis of international standards and best practices for the assessment of regulatory impact.4 Consultations were carried out as well. There were also consultations carried out for this assessment, involving a broad circle of representatives of interested parties, including the National Assembly, central and local government institutions, bodies of local self-governance, business associations, non-governmental organizations (NGOs), and academia. Empirical studies were conducted, but the analysis relied mostly on data and information from other sources. The present Assessment made empirical studies (e.g. survey and analysis of enforcement of local regulatory regimes in three municipalities), but mainly relied on information and data published in official documents from national and international sources, as well as from additional sources.5

1.4

General Limitations of the Analysis

This report presents an ex-post assessment on the overall economic activity in Bulgaria but there are general limitations for the assessment. The report presents an ex-post assessment of the impact of LARACEAA on the overall economic activity in Bulgaria and on all legal subjects who take part in it. There are, however, certain barriers of the analysis that— along with the presence of a number of informational, institutional and statutory impediments—constitute limitations for the assessment. Specificity of the legal system. The general nature and comprehensiveness of the Act make it difficult to determine whether and to what an extent the observed impacts resulted from the action of LARACEAA itself, or from the action of other interventions, legislation and factors. In the Bulgarian legal system, the legislation hierarchy consists of the Constitution, laws and regulations. The Bulgarian legal system does not recognize the so-called “constitutional laws” that would hierarchically stand above common laws (LARACEA is a common law) and could regulate the general principles that common laws have to conform with. In logical sequence, common and special laws should specify the legal norms of the Constitution from general to specific provisions, while special laws, in turn, should specify and operationalize common laws. Quite often, however, logical contradictions arise among the laws. In such cases, an interpretation of the will and intention of the legislature is required. Where there is a conflict between a common and a special law, the rules of the special law shall be applied (lex spetialis 3

According to SIGMA (2001, p.19), the impact of operative regulations is assessed to evaluate whether: (i) the intended objectives were met in an efficient way; (ii) unwanted side effects occurred and to what degree; (iii) the instrument has proven to be easily implementable; (iv) a high degree of compliance has been reached; and v) benefits and costs were distributed in a justifiable manner. 4

Those materials include Bulgaria Impact Assessment Guidelines, Council of Ministers (CoM), 2009; Regulatory Impact Assessment Manual, Institute of Market Economics, 2007; Regulatory Impact Assessment Manual, Association of Management Monitoring (in co-operation with USAID), 2007; and Impact Assessment, Ministry of Economy and Energy, April 2006.

Such information included, among others: documents and papers of the National Assembly, the CoM, and sectoral ministries (including programs, strategies, reports, laws, ordinances, decisions); comparative and national studies, ratings, reports, and databases of international organizations such as the World Bank, the OECD, the EC, the World Economic Forum and the Institute for Management Development MTITC; Studies and positions of the Economic and Social Council of the Republic of Bulgaria, the Bulgarian Industrial Association (BIA), the Bulgarian Chamber of Commerce and Industry, Bulgarian Industrial Capital Association, other business associations and NGOs. 3

derogat generalis). This allows for special laws to contain provisions that contradict the principal rules contained in common laws, and actually to revoke them. Regarding regulation, LARACEAA is a common law setting the most general principles of regulation. The particular application of these principles in different economic branches— for example energy, commerce and manufacturing, etc.—is subject to other special laws. For instance, the Law on Energy provides a licensing regime for energy producers with over 5 MW of installed capacity. In this case, the licensing requirements under the Law on Energy shell comply with the provisions of LARACEAA. Practically, though with lower legal status, the Law on Energy’s regulations can revoke LARACEAA’s general provisions (e.g. by containing rules that contradict LARACEAA’s general principles). Ex-ante Assessment of the Act is missing. An ex-ante assessment of the Act was not done. This is the reason why the goal, objectives and the related performance indicators were not initially articulated in a clear way. The base values of indicators were not determined, either. In the ideal case, the ex-ante assessment contains a set of goals, objectives and performance indicators by which progress is measured, as well the base values to which impact effects are compared. In the current case, the set of goals, objectives and indicators is constructed subsequently and serves as a basis for determining and estimating the effects and benefits of the Act. EU Accession had a special impact on the Bulgarian economy as it required introduction of many new regulations. The LARACEAA ex-post impact assessment covers a specific period of development of the national economy, notably its transition from associate to full EU membership. On the one hand, an adjustment had to be made of a great number of regulatory regimes, stemming from Bulgaria’s integration with the EU and its acquis communautaire. It is well known that the EC requirements play a significant role on the amount of the administrative costs.6 On the other hand, however, there was a strong pressure and growing demand for optimizing the role of the public administration in economic activity and reducing the regulatory burden on businesses. During the analyzed period, therefore, the regulatory environment framework and the public administration were subject to the influence of mutually contradicting factors, which inevitably resulted in inconsistency of the achieved results. Performance monitoring system with concrete indicators to evaluate the administrative and regulatory burden in Bulgaria is missing. Discussions about the reform of the regulatory regimes started about a decade ago. Projects of the Department for International Development of the UK and the World Bank on reducing the administrative barriers to business were initiated at that time. In fact, the adoption of the LARACEAA has been one of the performance benchmarks of the World Bank's Second Programmatic Adjustment Loan to the Government of Bulgaria, which observed Government accomplishments by end 2003. The establishment of the first entrepreneurs’ desks in the municipalities of Vidin and Pazardjik is a result of the efforts of the UK Agency. However, the performance monitoring system is still underdeveloped in Bulgaria. That makes it difficult to assess the impact of the Act since 2004. For instance, a number of estimations of overall regulatory burden have been provided annually by different sources. Sometimes the measurements differ due to different methodologies used to estimate the same phenomenon.7 In addition, there are no estimations of the administrative 6

By applying the Standard Cost Model, the Swedish Agency for Economic and Regional Growth calculated that this impact consists in 99 percent regarding the administrative cost in the food industry and 73 percent in agriculture (see NRR, 2008). 7 For instance, one World Bank study shows that proceeding from the “least favorable” to the "most favorable" quartile on a ranking of the regulation of business activities leads to an additional annual growth of 2.3 points of GDP (see Djankov, S., et.al., 2006). European Commission studies show a smaller impact on GDP growth resulting from reduced regulations. According to a research by the EC, if measures to reduce the administrative burden by 25 percent were applied in all EC counties (as per Lisbon objectives), the GDP would increase between 1.1 percent and 1.9 percent, depending on applied models. A simulation of the model QUEST shows an increase of the GDP by 0.3 percent in 2020, and this increase could be as much as 0.7 percent if markets are sufficiently flexible and competitive. A simulation of another model (WorldScan) shows an increase of 0.6 percent by 2020 for the EC. (EC, 2007). Furthermore, the Bulgaria Convergence Program 2009-12 (2010) lists two different 4

burden on economic activity in Bulgaria based on accepted methodologies, like the Standard Cost Model.8 Therefore, it is very difficult to evaluate the impact of the Act on the level of administrative burden in Bulgaria since 2004.

1.5

Structure of the Report

The following Chapter II of the report presents the background of the LARACEAA and the assessment. It defines a policy framework, a goal and objectives of the Act and it presents a set of performance measurement indicators used. Chapter III depicts the results of the ex-post impact assessment. The first subsection provides additional analyses on government measures for limiting administrative burden on businesses, various institutional initiatives, Impact Assessments (IAs) and training, as well as legislative improvement. The chapter combines quantitative and qualitative methods for the analysis. The supplementary qualitative methods are based on: (i) a survey of key stakeholders on the accomplishment of LARACEAA’s goal, objectives and main tools for attaining the objectives, and (ii) a unique study on implementation of four regulatory regimes at the local level. The second subsection presents status and dynamics of outcome indicators, output indicators and results indicators. Main findings of the IA are summarized at the end. Based on the ex-post impact assessment of LARACEAA, the final Chapter IV identifies the main problem, discusses underlying drivers and effects of the problem and proposes key recommendations to improve the Act in three particular areas: instrumental, institutional and economic.

assessments of the impact of the reduction of the administrative burden on businesses. According to the first assessment, the reduction of regulatory burden by 20 percent will result in an increase of 0.72 percent of GDP until 2025, and the respective figure of the second assessment is 1.44 percent. In the more distant future, to 2055, as per NRR study (2009), it has been calculated that the increase of the GDP over the period will be 1.6 percent. Still, others have calculated that “...companies in member states which have not implemented comprehensive programs for reforming their regulatory frameworks—such as Bulgaria—would incur direct costs of 10-15 percent of GDP” (see Jacobs & Associates and Institute of Market Economics, 2009). This estimate, however, does not include reduced effectiveness of the economy. 8

The use of the Standard Cost Model is also recommended by the European Commission (see EC, 2009). 5

CHAPTER

II BACKGROUND OF THE ASSESSMENT

The second chapter outlines a policy framework by discussing coherence with the Governmental and European Union (EU) policies, as well as relevant general and specific documents on regulatory reform, followed by analysis of the goal and objectives of the Act, and identification of performance indicators for the measurement of the impact of the Act. 2.1

Policy Framework

The better Regulation Policy is a major priority of the EU, as it is an important factor for reaching the targets of the Lisbon Strategy. Improvement of regulations aims to promote the public interest in a way that supports rather than hinders the development of economic activity. Regulatory frameworks and conditions created for business development by the state are among the main factors affecting business activity and economic growth. In 2002, the EC started a large-scale program for improving administrative regulation. The EU member-states initiated a series of activities and measures to improve business environment and the quality of new legislation to raise the competitiveness of the European economy. Reducing interference of the state are what the EU countries’ legislative programs encourage. The principle underlying the legislative programs of the EU countries is the reduction of interference by the state; if interference is inevitable, regimes are graduated in direction from the “heavier” to the “weaker” (see Figure 1).

Highest costs

Figure 1: Escalator of Regulatory Regimes

Regulatory Costs

licensing

permission

registration

notification

Control

Freedom

State Intervention

Source: Authors’ graph.

The heaviest regime (in terms of state interference) would be licensing whereas the weakest regime would be notification (see Figure 1). Within the EU, alternative forms, such as “coregulation” and “self-regulation” by business are also considered as "Better Regulation." The EC launched a new ambitious program for reducing unnecessary burden. In 2006, the EC launched a more ambitious program of reducing unnecessary administrative burden resulting from the existing legal structure of the EU based on the new Lisbon Strategy. A year 6

later, the European Council approved a Community target of reducing administrative burdens by 25 percent until 2012. To meet the target of the new EC program, Bulgaria developed national programs with measures to reduce administrative barriers and to facilitate creation of supportive business environments. Bulgaria developed two particular programs to address the new EC initiative in the area of Better Regulation, namely the National Reform Program (2007–09) and the Better Regulation Program (2008–2010) discussed below. The National Reform Program (2007–09) was a main strategic document of the Bulgarian Government, having an impact on measures to improve the business environment. The document aimed at systemizing the efforts of public administration, the NGOs and social partners in reforming the Bulgarian economy to achieve sustainably high rates of economic and employment growth. This was the first National Reform Program (NRP) for Bulgaria presented to the EC and the other member-states in March 2007. The starting points for the program were the Integrated Guidelines for Growth and Employment recommended by the EC in formulating policies and measures to achieve the targets of the Renewed Lisbon Agenda. In fact, the NRP was developed in response to the challenges posed to the EU member-states by the Renewed Lisbon Strategy. The NRP is a strategic document defining a medium-term framework of measures and priorities in the fields of macro- and micro-economic development, the labor market and human capital development. In fact, improving the business environment was one of the specific priorities of the NRP. Actions of the Government were directed at setting and strengthening good governance principles by finding the optimum ratio between administrative regulation and simplification of certain administrative regimes. The objective was to reduce the time required for issuing business licenses and permits. The NRP envisaged improvement of the business environment in two main areas: good governance in public administration and reducing administrative and regulatory barriers to entrepreneurship. Another more specific program is the Better Regulation Program (2008–10). In 2008, the Council of Ministers (CoM) approved the Better Regulation Program 2008–2010, directed at achieving sustainability of the process of building a good regulatory environment. The goal of the program was to reduce administrative barriers to business and to improve administrative regulation. It was expected that the program results in building an environment of better regulation in Bulgaria, in the context of the EU Lisbon Strategy, through the National Reform Program (2007–2009), the Investment Encouraging Strategy (2005–2010), and the National Small and Medium Enterprises Promotion Strategy (2007–2013). The measures of the Better Regulation Program aimed to contribute to developing a regulatory system with low expenses and small risk, thus supporting the national competitiveness and at the same time efficiently protecting public interests. To attain this objective, Bulgaria needed to build the required capacity in compliance with best European regulatory practices. To reduce administrative barriers to business and to improve administrative regulation four objectives were specified by the Better Regulation Program 2008-10, namely:  Abolition or simplification of administrative regimes;  Establishment of an institutional structure for implementation and control of Better Regulation Policy;  Acceleration of the dialogue with interested parties;  Regulatory improvement at the municipal level and strengthening of regional and municipal capacity for good regulatory practices. Concrete measures were developed to attain the program’s objectives. Regarding the first objective, the envisaged measure involved systematic reviews for elimination of administrative barriers and improvement of regulation of economic activity in close co-operation with 7

stakeholders. As an initial step in this direction, concrete administrative regimes are identified to be abolished and simplified after proposals by business associations. The program also envisaged a measure related to Bulgaria’s commitment to the EC Action Program for reducing unnecessary administrative burdens stemming from the existing legal structure of the EU. Abolition or simplification of administrative regimes, implementation of alternative regulation and reduction of administrative burdens had to take into account the role of the state in protecting national security and public order, and its explicit and sovereign rights stipulated by Art. 18, para. 1–4, of the Constitution of Republic of Bulgaria, as well as the necessity for protecting the personal and property rights of citizens and legal persons, and of the environment. Part of the measures under the Better Regulation Program regarded activities related to the integration of administrative services on the principle of “episodes of life” and “business events” so as to ease and simplify access to and delivery of complex services. Reforming regulatory regimes was/is given particular attention in other national strategic documents as well. Such strategic documents are the National Strategic Reference Framework (NSRF) 2007-2013, the Convergence Program 2009-2012, Operational Program “Administrative Capacity” (OPAC) (2007-2013), the Electronic Government Strategy, the Medium-term Fiscal Framework 2010-2013, Bulgaria Investment Encouraging Strategy (20052010), and the Government’s European Development of Bulgaria Program (2009-2013). These documents also envisage measures and activities aiming at improving the business climate and reducing administrative barriers to economic activity. For instance, Priority 3 of the NSRF 2007–2013 is “Promotion of entrepreneurship, favorable business environment and good governance.” Strategic priorities set by NSRF are further developed in seven National Operational Programs. In fact, part of the funds under Operational Program “Administrative Capacity” (OPAC) are planned to cover the fulfillment of Priority 3. It needs to be further specified that achieving the targets of NSRF is envisaged by a set of measures grouped into four priority axes. Priority Axis III is defined as “High-quality administrative services and development of electronic governance.” Beneficiaries under the program include central, regional and municipal administrations; the judicial system; NGOs; and structures of the civil society. Further, by adopting the Strategy on the Electronic Government9 in 2002, the Government undertook to provide 20 main administrative services electronically, including 12 services for the citizens and 8 services for business. The same are approved by the EC as indicative for the development of electronic government. The strategy was updated in 2006.10 The current Government continued working on regulatory reform. The present Government undertook measures on optimizing the administration and reducing the administrative burden. This is discussed by the World Bank (2010b) report on Administrative and Regulatory Barriers to Business.11 Particular measures to improve the business environment are envisaged also in the Program of the new Government, entitled European Development of Bulgaria (2009–2013).12 As envisaged by the Convergence Program 2009–2012, the current Government plans to undertake an elimination of 136 administrative obligations, thus contributing to a saving of EUR 13 million by business. Moreover, a 20 percent reduction of administrative burden, which is targeted, would result in a 1.44 percent growth in GDP by 2025.13

Decision № 866/ on December 28, 2002 of the CoM (2002a). Decision № 482/2006 of the CoM. 11 See more details about current government measures in World Bank (2010a) 12 See (__2009a). 13 Convergence Program 2009-2012 (2010). 10

The Medium-Term Fiscal Framework 2010–201314 adopted by the CoM also contains measures on improving business environment, creating favorable conditions for development of business and encouraging investments in Bulgaria. Measures related to the business environment include:    

Review and bringing into compliance of all existing regimes with regard to their lawfulness and appropriateness; Review and determination of real rates of fees paid for licensing, permission, etc.; Reduction of quasi-taxation burdens through liberalizing product market regulations as a precondition for diminishing corruption and the influence of special interest groups; Increase the productivity of public expenditures and the quality of goods and services delivered by the state.

Overall, Bulgaria follows the EU policy on Better Regulation Agenda, and as a result has adopted several strategic and specific programs to address the issue since 2004. However, impact of the regulatory reform policies is yet to be seen. In recent years, the Bulgarian Government has adopted several national and more specific programs, targeting reduction of the administrative burden and relief of regulatory barriers for firms to address the Lisbon Strategy of the EU. But implementation of the provisioned measures is ambiguous. The current Government has also planned activities to improve the business environment. However, results from the impact of these policies are yet to be seen. The next subsection discusses in brief the goal and main objectives pursued by the Act in order to provide the ground for the selection of performance indicators used to assess the impact of the Act both in qualitative and quantitative terms.

2.2 Goal and Objectives of the Act LARACEAA establishes the general rules of limiting administrative regulation and administrative control of economic activity. The Act’s goal (or general objective) is to place publicly justified limits on administrative regulation and control of business and to raise the national competitiveness. LARACEAA is the first significant legislation in Bulgaria that aims to define the acceptable limits of administrative regulation and control on business. So formulated, the rational of the Act stems from the liberal idea of the “limited” state which, as laid down in the motives of the Act, “limits and controls itself in favor of business and public society.”15 The Act identifies a public interest in three major areas of regulation of economic activities (Art. 2, LARACEAA), namely:   

National security and public order (sovereign rights of the state); Personal and property rights of individuals and legal persons; Environmental protection through regulated economic activity.

Going beyond these limits means overregulation and over-control (i.e. publicly unjustified burdening of economic activity), according to the Act. This self-limitation of public power represented by public authorities and local governance bodies is in full conformity with the spirit of Art. 19, para. 1 of the Constitution of Republic of Bulgaria. It proclaims the right to free economic initiative as a basis of the national economy. 14 15

Decision № 705/ on August 31, 2009 of the CoM. See CoM (2002b). 9

This means that freedom of economic activity is the rule and any kind of restriction is an exception to the rule. The socio-political as well as the legal-and-regulatory logic demands that exceptions to the rule are regulated, interpreted and applied restrictively and not extensively. Imposing limits on intervention by public authorities in business activity does not mean such interventions are abolished; it does mean that interventions must be precise, reasonable, and acceptable from the viewpoint of modern society. In addition, it should be taken into account that LARACEAA does not cover the whole range of relationships between the business community and the state administration. This Act cannot be identified as an administrativeeconomic code. As underlined above, the Act’s goal is to establish clear principles for introducing and implementing restrictive administrative regimes in economic activity. Therefore, all daily administrative relationships regulated by the Administrative Procedure Code and many other special laws remain beyond the scope of LARACEAA. Several major objectives pursued by the LARACEAA are identified:  Protect free economic initiative;  Clearly outline the limits of administrative intervention in economic activity at central and local levels;  Restrict and reduce publicly unjustified burdening of economic activity;  Provide clear definition of the types of regimes regulating economic activity;  Increase transparency in the introduction of regulatory regimes;  Limit the informal economy by reducing the administrative burdens on legitimate economic activity;  Limit the enactment of new regulatory regimes (licensing or registration) by requiring evidence of the necessity for such a regulation and advance notification of affected persons;  Eliminate normative requirements that are likely to reduce competition;  Reduce the sources of corruption by limiting the discretionary power of administrative agencies and officials; Ensure publicity in the work of administrative authorities in applying regulations and controls on economic activity, as well as of the reasons for such actions.

2.3 Performance Indicators of the Assessment The definition of performance indicators follows the division of the objectives in two groups, namely: goal and a set of objectives. The goal represents the long-term effects and impacts of the regulation on the direct target groups and other interested parties (see Table 1). The specific objectives represent the more immediate results and effects of intervention on the respective target groups. That is why the specific objectives have a more apparent and measurable nature compared to the broader goal. Another substantial difference between the two groups of objectives is that while reaching the objectives is related to a particular intervention resulting from a concrete law or specific programs, the attaining of the goal is influenced by a much wider set of laws, programs or an aggregation of special interventions. Due to the different contents and role of the goal and objectives, there are essential differences in selecting and formulating indicators for their measurement. Indicators for measuring the goal are related to the general state-of-affairs and estimations of the country’s competitiveness, ease of doing business, and administrative burden. The indicators identified in Table 1 represent an ideal set that might be modified in every concrete situation and country as per availability and reliability of statistical information. In a more uncertain situation it would be better to complement quantitative indicators with qualitative analysis mainly gathered from surveys, case studies, and interviews, as demonstrated in this report.

Table 1: Performance Indicators of the LARACEAA's Ex‐post Impact Objective G O A L

To establish publicly justified limits on administrative regulation and control of business and to raise the national competitiveness.

Effect O U T C O M E

Type of Indicators

Source of Information

Quantitative Indicators 1. GDP growth rate 2. Competitiveness indices 3. Ease of doing business indices 4. Administrative burden indicators

NSI, World Bank – Doing Business, WEF, IMD, OECD, Standard Cost Model

Qualitative Indicators Perceptions of key stakeholders on achievement of the goal

O B J E C T I V E S

1. To protect free economic initiative 2. To clearly outline limits of administrative intervention in economic activity at central and local levels 3. To restrict and further reduce publicly unjustified burdening of economic activity 4. To provide clear definition of the types of regimes regulating economic activity 5. To increase transparency in the introduction of regulatory regimes 6. To limit the informal economy by reducing administrative burden on economic activity 7. To limit the enactment of new regulatory regimes (licensing or registration) by imposing the requirement for evidence of the necessity for such a regulation and advance notification of affected persons 8. To eliminate normative requirements likely to restrict competition 9. To reduce corruption by limiting the discretionary power of administration 10. To ensure publicity of the work of administrative authorities in applying normative acts related to administrative regulation and control of economic activity, as well as of the motives for their change.

I N P U T, O U T P U T, & R E S U L T S

Survey

Quantitative Indicators 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Regulatory burden Legal framework efficiency Level of bureaucracy Ease of doing business Share of time spent in dealing with regulations Financial expenses of the business to cover administrative burden Share of firms identifying regulatory regimes as major constraint Number of regulatory regimes – total and by type Share of informal economy Corruption level indices Number of electronic services Number of regulatory regimes with public registers Number of abolished regulatory regimes Number of simplified regulatory regimes Number of IAs of implemented regulatory regimes Administration work transparency indices State and municipal taxes collected for business services Costs of regulation performing administration Number of employed in administrative services.

National Statistical Institute, Business Environment and Enterprise Performance Survey (BEEPS) and World Bank Enterprise Survey, Doing Business, OECD, CoM, MF, National Assembly, Register of Regulatory Regimes

Qualitative Indicators Perceptions of key stakeholders on achievement of the objectives.

Survey, Case Studies, Interviews and Discussions.

Source: Prepared by the authors.

Outcome indicators The outcome indicators relate to the achievement of the goal. They concern the wider effects of the policy and go beyond the direct and immediate influence on target groups. They comprise long-term effects on the economy, social activities and ecology. Such indicators are as follows: (i) Indicators of economic impacts (GDP growth rate, indices of competitiveness, ease of doing business indices, administrative burden indicators); (ii) Indicators of social impacts (employment and labor markets, social involvement, indices of good state governance and administration, publicity and awareness, and civil control of the activity of public authorities); and (iii) Indicators of ecological impacts (regulatory regimes related to environmental protection and sustainable development). Depending on the logic of intervention, indicators for measuring the specific objectives can be grouped as follows: Input indicators These indicators provide information on the financial, human, material, organizational or regulatory resources necessary to implement the policy. This group of indicators includes, for example, costs of central and local administration involved in regulation, the number of people employed in administrative services, etc. Output indicators These indicators relate to the immediate results expected to be produced (or, services to be delivered) by implementing the policy. Such immediate results include:     

number of abolished regulatory regimes; number of simplified regulatory regimes; number of regimes abolished at the municipal level; number of implemented electronic services; others. Results indicators

These indicators reflect the immediate effects of policy on target groups, beneficiaries and those who are directly addressed by the policy. This group of indicators includes:     

financial expenses paid by businesses to comply with regulations; time spent by businesses to comply with regulations; administrative burdens; time needed to deliver administrative services to businesses; others.

CHAPTER

III

EX-POST IMPACT ASSESSMENT OF THE LARACEAA The third chapter puts emphasis on the ex-post impact assessment of the LARACEAA. It first discusses specific initiatives of the Bulgarian Government on reduction of administrative regulation and control by specifically addressing administrative and regulatory burdenreduction measures, institutional initiatives, conducted impact assessments, analyses and training and legislative initiatives for the period between 2004 and 2009. Then, it embarks on issues of state and dynamics of impact assessment indicators. The first subsection provides additional analyses in order to overcome the limitations of the ex-post assessment. These supplementary analyses are based on: (i) a survey of key stakeholders on the LARACEAA’s accomplishment of its goal and objectives, and (ii) case studies of four regulatory regimes at the local level. The second subsection presents results on outcome indicators, output indicators and results indicators. Input indicators are not analyzed as per general limitations of the assessment discussed earlier. Finally, the chapter summarizes main findings and conclusions. 3.1

Government Measures and Initiatives

Since 2004, the Bulgarian Government has initiated a number of actions to modernize business regulation. However, these actions have had only partial effect and they have not guaranteed orderliness and stability of the process of creating a better regulatory environment. Undertaken initiatives in the area of Administrative and Regulatory Reforms can be systematized in the following groups:    

Administrative and regulatory burden-reduction measures; Institutional initiatives; Conducted impact assessments, analyses and training; Legislative initiatives.

3.1.1 Administrative and Regulatory Burden-Reduction Measures According to the first annual report for the implementation of the Better Regulation Program for the period 2008–2010, a total of 25 administrative regimes were proposed for abolition and simplification until April 2009. In co-operation with the interested parties, another 17 administrative regimes have been identified to be abolished or simplified. To improve regulation at the local level, a review of introduced administrative regimes has been done as well. As a result, 167 municipal regimes were abolished within one year. Specific information about the status of the regimes under the Better Regulation Program and Implementation of the Measures under the Better Regulation Program by April 2009 can be found in Appendix 2 and Appendix 3.

Accomplishments of the Better Regulation Program 2008–2010 on Abolition and Simplification of Administrative Regimes: Results regarding simplification and removal of unnecessary regulatory regimes are mixed. During the period under consideration, reviews have been done of administrative regimes and barriers to economic activity in cooperation with interested parties (employers’ organizations, branch associations, etc.). As a result, a list of regimes for simplification and abolition has been drafted. On the approved list of 16 out of 17 identified administrative regimes, the CoM has adopted the simplification of twelve regimes and five regimes for abolition, but the national parliament has not yet approved these proposals. In addition, the “Registration of a commercial establishment” regime introduced illegally in 140 municipalities, was dropped in 110 of them by March 2009; and 30 municipalities continue to apply this regime. Two of the identified regimes shall not be simplified, since it is considered that they are related to stringent regulation. These regimes are “Licensing of activity as commodity exchange” and “Permission to organization on waste utilization.” Another regime, “Licensing of operators of airport ground operations,” will not be simplified, since consultations with the EC have confirmed the necessity of the regime. Three other regimes, including “Permit of performance of activities including collection, transportation, temporary storage, preliminary treatment, utilization and/or rendering harmless of waste,” “Permit of performance of taxi transportation” and “Permit of performance of occasional transportation” are envisaged for consideration by the CoM. Consultations with business associations have been conducted, but more needs to be done. For the time being, only consultations with representatives of business associations have been used in identifying regimes for further simplification. A more precise hands-on alternative method to this practice is the suggested analysis of the compliance of regimes with the main criteria stipulated by LARACEAA (see Appendix 1). By applying this method, this study identified nine regimes that do not meet entirely the requirements of these criteria. This group includes the following regimes: customs agent activities; manufacturing of compact disks (optical disks) and/or matrices for them; industrial processing of tobacco and production of tobacco products; and production of alcohol, distillates and alcoholic beverages. This analysis may be very helpful in determining priority regimes to be considered and suggested for simplification in the future work of the Better Regulation Program. Limited number of alternative forms of regulation has been introduced. An alternative form of regulation was introduced in practice in early 2009, when the Ministry of Interior implemented a provision that road accident findings can be filled-in by citizens without the interference of police authorities. Another example is related to adoption of the Law on Independent Evaluators.16 The regulation of the activity of independent evaluators has been transferred to a professional organization, the Chamber of Independent Evaluators. This action is part of a measure on transferring certain regulatory functions, such as license regimes, to branch organizations. The constituent assembly of the Chamber was held in March 2009. Licensing regimes slightly increased since 2003. In spite of undertaken measures, licensing regimes increased during the analyzed period from 39 to 42 (see Figure 2), which resulted from the implementation of five new regimes and the abolition of two regimes. Seven amendments and supplements have been made to six regimes throughout the period. Most intensive was the establishment of new regimes in 2009, when three regimes were implemented, while abolished regimes (one in a year) refer to 2004 and 2007, respectively (see Figure 3).17

Promulgated SG 98/ November 14, 2008. In 2007, the Bulgarian Industrial Association has conducted a study on the illegal enforcement of regulatory regimes in Bulgaria. They concluded that 1 licensing regime has been illegally applied by the central administration, while the local administration applied illegally 60 licensing regimes. The same was valid for about

Figure 2: Small number of licensing regimes amended since 2003 45 40 35 30 25 total number 20

amended

15 10 5 0 2003

2004

2005

2006

2007

2008

2009

Source: Authors’ estimates, based on the amendments of the LARACEAA.

Figure 3: A few licensing regimes introduced and very few abolished since 2004 3

new

abolished

0 2004

2005

2006

2007

2008

2009

‐1

Source: Authors’ estimates, based on the amendments of the LARACEAA.

Regarding the implementation of electronic services, analyses show that these may be an efficient tool for reducing administrative burdens. However, the practice in implementing electronic services has demonstrated weaknesses, as follows: 

Services are developed according to the internal rules of individual institutions, making it difficult for them to become an integrated part of a single e-service environment.



Working processes of services are designed to be comfortable for the administration, not for the consumers;



There is a lack of a nation-wide model of rules for working with electronic documents.

190 registration regimes applied by the central administration and about 370 registration regimes by local administrations, whereas about 750 permission regimes were applied illegally by local administrations. However, more recent data on application of regulatory regimes is lacking. Therefore, this report uses information only about licensing regimes. 15

To overcome these weaknesses, the Government has undertaken the following steps: The adopted Law on Electronic Governance (LEG)18 provides for automatization of administrative procedures, transparency of processes in state administration, reduction of possibilities for corruption as well as reduction of administration costs. LEG stipulates the single creation and multiple uses of data, the obligation for interinstitutional exchange of e-documents, mutual compliance of information systems and information security. The Law also aims to reduce the time of delivering administrative services to citizens and business. The LEG has created grounds for a substantial reform in administration’s use of new information technologies and joint use of hard-copy and electronic documents; An integrated system of e-government is being built with the aim of providing a model for integrated e-governance at regional and central levels. The e-government portal has been created, www.egov.bg. This is the contact point for access to all e-services delivered by central administration. The system offers a centralized approach to managing documents, operation processes, contents and policies. A special chapter contains a catalogue of regulatory regimes by type; A pilot integration system of electronic region (PISER) has been initiated which aims to build infrastructure for assisting the institutions in three regions (Bourgas, Dobrich and Stara Zagora) to more efficiently manage their activity and deliver administrative services electronically (see Box 1).Standardization of services and processes has been introduced to improve public access to administrative services. State authorities created a single place for access to administrative services on the principle of “one-stop shop.” “One-stop shop” services have been introduced by 77 percent of central administration structures, 96 percent of regional and 82 percent of municipal administrations.19



Box 1: Establishment of a Pilot Integrated System of an Electronic Region In accordance with the project Pilot Integrated System of an Electronic Region (PISER), three electronic regions have been established in Burgas, Dobrich and Stara Zagora. The so-called “regional portals” are the basis of the project; they provide opportunities for citizens and business to electronically request and receive services, provided by their regional and municipal administrations. This opens a “door” toward an administration capable of operating 24 hours a day, 7 days a week. The developed program solution provides opportunities for the establishment of a connection between the different administrative services and the different sources of information on the basis of a standardized interface. On the three pilot regional portals, the citizen and business can find information about 100 services provided by their regional administrations, accompanied by a detailed description of the normative framework, the procedures and execution terms as well as the necessary templates and forms. Each municipal administration included in the project provides five services via its regional portal. Over 200 transactions have been carried out between the start of the three regional projects in September 2006 and the end of March 2009. On average, the portals are visited by 350 users daily. Source: MSAAR (2009).

3.1.2

Institutional Initiatives

The Council for Economic Growth (CEG) became an important consultative forum on Better Regulation. The CEG, established during the analyzed period and presided over by the Minister of Economy, became an important public-private consultative forum. The Council, together with experts from the Ministry of Economy, has developed measures for implementation of the principles of Better Regulation adopted by the CoM on August 3, 2006. 18

Promulgated SG 46, 12.06.2007

MSAAR (2009).

One of the key measures was the introduction of a clear relationship between the executive agencies and the business associations in the implementation of the Better Regulation Policy. The measures would introduce the practice of analyzing and monitoring—through ex-ante and ex-post regulatory impact assessments—legislative drafting and enforcement issues that would create problems for economic entities.20 Close cooperation between the Bulgarian Government and the World Bank resulted in Bulgaria’s recent progress in the area of regulatory reform. The World Bank supported the Bulgarian Government through analytical and advisory work in the regulatory reform area. The first joint World Bank and Ministry of Economy and Energy report analyzed administrative procedures in three sectors of the economy—tourism, food, and road transportation—calling for reduction and simplification of certain administrative regimes that are burdensome. It emphasized superfluous regulation at the municipality level as well. Another report, Bulgaria’s Policy for Regulatory Reform in the European Union: Converging with Europe’s Best Regulatory Environments, recommended a national nine-step strategy that was approved by the Council for Economic Policy on October 19, 2007. These two reports, and the consultation process with other line ministries, business associations and think tanks, actually paved the way for the Better Regulation Program 2008–2010, approved by the Bulgarian Government in April 2008. Another World Bank report from June 2009 called for a systematic, fair, and transparent regime of state fees. The report noted that there is no policy in place regarding the setting of state fees; this is one reason for the “wild” development of tariffs that include state fees, additionally burdening business, especially small and medium businesses. The report further indicated that the legal framework for the regime of state fees is insufficient, and there is weak institutional framework to monitor the setting and approval of state fees. Implementation of key recommendations is yet to be seen. Better Regulation Unit was created. The Better Regulation Program 2008–2010 provided for establishment of the Better Regulation Unit, which was also advised by the World Bank. With amendments to the Rules and Procedures of the CoM and its administration, adopted in February 2009,21 the Strategic Planning and Management Directorate assumed the functions of coordinating the implementation and reporting of the Better Regulation Program, and the Directorate began to execute the functions of a “Better Regulation Unit.” Few months later, after the new government came in power, the new Rules and Procedures of the CoM and its administration assigned these functions to the CoM’s Economic and Social Policy Directorate, as of October 2009. A second review of the Program is forthcoming with the purpose of taking into account the new realities and new governmental priorities. Internet portal for consultation was launched by CoM Administration. Responding to the needs and the understanding that the dialogue with stakeholders is of key importance for the successful implementation of most of the measures in the Better Regulation Program, immediately after the adoption of the Better Regulation Program an internet portal was launched for public consultations: www.strategy.bg. The requirement was adopted for all draft legislation related to administrative regulations to be uploaded to the site at least 30 days before their inclusion in the agenda of a meeting of the CoM. Even before the internet portal for consultations, an Administrative Register was established. Before the portal, a Register of Administrative Structures and Acts of the Public Authorities has been created.22 Although still accessible, this Register is no longer updated. Another newly established Register (www.egov.bg) has been developed, as mentioned above. It is much better organized technically, but there are many issues in terms of its updating. 20

For more information about the role of the CEG and other policy initiatives, see World Bank (2008) or Policy Note on Private Sector Development in World Bank (2010b). 21 See CoM’s Rules and Procedures and its administration, SG, No. 10/2009. 22 See www1.government.bg/ras/regimes/index.html. 17

The new Government maintained the reform. An Administrative Reform Council was set up to deal with Administrative Reform, including reduction of the administrative burden. An Administrative Reform Council has been established by CoM decision in August 2009.23 The Council is headed by the Deputy Prime Minister and Minister of Finance, and the Deputy of the Council is the Minister of Labor and Social Policy. In November 2009, the Government adopted a Regulation on the organization of the activity of the Council. The goals of the Administrative Reform Council are to: (i) contribute to the governmental policy on strengthening and developing the public administration; (ii) propose strategic directions; and (iii) coordinate draft regulatory acts on establishment, reorganization and termination of administrative structures, administrative reform at local and district levels, administrative services, e-government, status of civil servants and human resource management in the public administration. The new Bulgarian Government continued cooperation with the World Bank in the area of regulatory reform. The CoM Administration continued working with the World Bank on a study to analyze administrative and regulatory barriers to business. The report will come out in July 2010 and is based on a survey of over 300 firms in Bulgaria; it has been commissioned by the Bulgarian counterpart, using a survey methodology devised by the World Bank.24

3.1.3 Conducted Trainings

Impact

Assessments,

Analyses

and

EU supported the Better Regulation Agenda in Bulgaria through funding an initiative by the CoM Administration. Through Operational Program Administrative Capacity, EUR 1.25 million have been granted to the CoM’s “Better Regulation Unit” to perform 14 regulatory impact assessments.25 Within the framework of this project a methodology for performance of legislative and strategic impact assessment was elaborated and adopted by the CoM.26 Training sessions also started for the experts from the Directorate and from the central and territorial administration units. Gained knowledge and skills will help the experts from CoM’s Economic and Social Policy Directorate to provide methodological assistance to their colleagues from the public institutions to carry out impact assessments.27 The Ministry of Economy and Energy also supported the Better Regulation Agenda through a pilot study. A consultancy consortium conducted a review of the national legislation for the Ministry of Economy and Energy between August 2008 and May 2009 (2009b). It identified 398 obligations for provision of information, stated in 33 laws and respective secondary legislation. The total administrative costs of these obligations are calculated at EUR 81 million and the administrative burden was calculated at EUR 51.5 million, or 64 percent of the administrative costs. The project consultants proposed a reduction of 136 obligations for provision of information that would save business approximately EUR 13 million. This represents a reduction of the administrative burden by 25 percent for the provision of information. Almost all of this reduction—nearly 24 percent of the 25 percent 23

See Decree №192 from 5 August 2009. The World Bank reports are publicly available at www.worldbank.bg. 25 Seven ex-post impact assessments have been conducted through consultancy work on the Investments Promotion Act, the Waste Management Act, the Child Protection Act, the Law on Drugs in Human Medicine, the State Fees Act, the Local Taxes and Fees Act, and the Social Assistance Act. Another seven ex-ante impact assessments have been conducted through consultancy work on the draft Act on Amendment and Supplement (AAS) of the Law on Measurements, the draft AAS of Investments Promotion Act, the draft AAS of the Waste Management Act, the draft AAS of the Law on Foods, the draft Act on Hydro-meliorations and Irrigation Agriculture; the draft of AAS of the Law on Health Institutions, and the draft Law on Public Libraries. 26 Jacobs &Associates and Institute of Market Economics (2009a). 24

A total of about 250 public officials were trained to carry out impact assessments as per Better Regulation Unit’s report covering the period between January and June 2009.

total—would result from the reduction of administrative burdens imposed by five acts: Law on Private Security Activity, Public Health Act, Protection of Agricultural Lands Act, Law on Tobacco and Tobacco Products, and the Social Insurance Act.

3.1.4

Legislative Initiatives

District Governors have been given additional powers to ensure that municipal regulations conform with the LARACEAA. District Governors have undertaken several initiatives in that regard, mainly in terms of repealing municipal regulations and sending them before the Administrative court. Reforms in the judicial system were initiated. With the adoption of the Commercial Register Act28 and the Act on Amendment and Supplement to the Commercial Act,29 regarding trade representatives and insolvency procedures, the legal and the institutional frameworks have been established for the reforms in the judicial system. With the implementation of these measures, the procedure on registration of traders became easier, quicker and cheaper. In addition, a draft Act on Normative Acts has been prepared. After its adoption, the process of impact assessment in the public administration will be institutionalized.

3.2 Status and Dynamics of Quantitative Indicators30 3.2.1

Outcome Indicators

Studies by the World Economic Forum (WEF) and the Institute for Management Development (IMD) are used to determine Bulgaria's international competitiveness. Within the studies conducted by WEF, Bulgaria is featured throughout the entire examined period, while the comparative data from the IMD included Bulgaria since 2006. Due to the constantly changing number of countries included in those studies, Bulgaria’s ranking is represented in two ways. The first way is in accordance with the absolute spot the country occupies during each year in comparison to other countries. The second way, entitled relative spot ranking, is based on a calculation of the spot the country would have taken if the number of participants included for the purposes of comparison were 100. This allows for a more precise comparison of the country’s dynamics during the examined period. Bulgaria’s competitiveness is low as per WEF’s ranking by both absolute and relative spot. Bulgaria’s absolute ranking is between the 70th and 80th position, while the relative ranking varies around the median (see Figure 4). Subsequent to a notable improvement of the competitiveness during the period 2004-05, the dynamic of the development of this index is negative because of the subsequent worsening of the absolute and relative ranks.

SG. No34/ on April 25, 2006, amended, SG, No44/ on June 12, 2009. SG, No38/ on May 9, 2006. 30 The following quantitative analysis of the period after 2003 uses the performance indicators that were specified in Table 1. Input indicators are not analyzed because of the lack of reliable data. 29

Figure 4: Bulgaria’s Global Competitiveness Index ranking is low and not improving 90 80 70 60 50 rank

relative rank

30 20 10 0 2004

2005

2006

2007

2008

2009

Source: Global Competitiveness Report (WEF, 2004–2009).

Figure 5: Bulgaria’s ranking by the Competitiveness Index of IMD slightly improved 90 80 70 60 50 rank

relative rank 30 20 10 0 2006

2007

2008

2009

Source: World Competitiveness Yearbook (IMD, 2006–2009).

The IMD data shows the country is slightly improving. Bulgaria ranks between the 67th and 77th place among the 100 countries as per IMD studies (see Figure 5). The development dynamic of this index, however, is favourable both with regard to absolute and relative ranking. With every passing year the country improves its position and moves closer to the average group. Improvements in Bulgaria's business environment are also noted in the "Doing Business" index. Bulgaria has achieved substantial progress over the past five years with respect to its Doing Business rankings. Although there have been some areas where Bulgaria’s relative positions have stayed the same (e.g., protecting investors) or even worsened (e.g., number of procedures and time to get a construction permit), Bulgaria has improved in many areas (see Table 2:). For example, reductions in the number of procedures, the time to register, the cost of registration, and the minimum capital requirement have made starting a business considerably easier since 2004. Similarly, the total tax rate and the number of tax payments have been reduced. 20

Table 2: Improvement of Bulgaria’s Doing Business Ranking Since 2004 Indicators Starting a Business

Dealing with Construction Permits Registering Property Getting Credit

Protecting Investors

Paying Taxes Trading Across Borders

Enforcing Contracts Closing a Business

Procedures (number) Time (days) Cost (% of income per capita) Min. capital (% of income per capita) Procedures (number) Time (days) Cost (% of income per capita) Procedures (number) Time (days) Cost (% of property value) Strength of legal rights index (0-10) Depth of credit information index (0-6) Public registry coverage (% of adults) Private bureau coverage (% of adults) Extent of disclosure index (0-10) Extent of director liability index (0-10) Ease of shareholder suits index (0-10) Strength of investor protection index (0-10) Payments (number per year) Time (hours per year) Total tax rate (% profit) Documents to export (number) Time to export (days) Cost to export (US$ per container) Documents to import (number) Time to import (days) Cost to import (US$ per container) Procedures (number) Time (days) Cost (% of claim) Recovery rate (cents on the dollar) Time (years) Cost (% of estate)

2004 or earliest available 11 32 10.4 86.7 20 127 475.2 9 19 2.4 8 3 1.3 0 10 1 7 6 31 616 46 7 26 1233 10 25 1201 40 564 23.8 33.8 3.3 9

2009 4 18 1.7 20.7 24 139 436.5 8 15 2.3 8 6 34.8 6.2 10 1 7 6 17 616 31.4 5 23 1551 7 21 1666 39 564 23.8 32.1 3.3 9

Source: Doing Business 2004‐2010 (World Bank), Table adopted from World Bank (2010a).

With regard to relative ranking, Bulgaria ranks close to the first quartile in the Doing Business index. The Doing Business index dynamic is positive, and during the last two examined years the country ranks in the first quartile with regard to relative ranking (see Figure 6). In 2007 Bulgaria ranked among the top 10 reformers with regard to the improvement of conditions for doing business, although the country was ranked 46th. In 2009 the country was not a top reformer but it was ranked 51st (see Figure 7), ahead of Hungary, Romania, Poland, Italy, Czech Rep. and Greece. Of the new EU member countries, Latvia, Lithuania, Estonia, Slovakia and Slovenia ranked higher than Bulgaria. The improvements in the area of regulation have continued. For example, since the most recent Doing Business 2010, which includes improvements through June 2009, the new government has reduced minimal paid-in capital for limited liability companies to EUR 1 from EUR 2,500. This emphasizes the potential for continued improvement along a number of dimensions.

Figure 6: Bulgaria’s relative ranking by the Doing Business Index improves 70 60 50 40 rank

relative rank

20 10 0 2006

2007

2008

2009

2010

Source: Doing Business Report (World Bank, 2006‐2010). Note: This ranking does not incorporate the recent changes in the Doing Business methodology.

Figure 7: Bulgaria takes 51st position as per Doing Business 2010 ranking

Source: Doing Business 2010 (World Bank, 2009). Note: This ranking does incorporate the change in the DB2010 methodology.

In terms of product market regulation, Bulgaria demonstrates a good standing compared to the EU average. Using the methodology developed by OECD experts for measuring regulation of the product market, a World Bank team conducted a study on Bulgaria. It found that in 2006 the country received a mark of 1.8, which ranks it between the Czech Republic and Hungary (see Figure 8). Bulgaria still lags behind the average level of this indicator among the 15 EU member-countries and of the OECD countries, which have been represented by 2003 data.

Figure 8: Bulgaria’s Product Market Regulation Index compares well with EU‐average

Source: World Bank (2007).

The World Bank Enterprise Survey conducted in 2009 indicates that Bulgarian managers do not rate requirements for licenses and permits among the most significant constraint to their businesses. The biggest problems for Bulgarian firms are access to finance, as shown in more than 17 percent of the answers, and the presence of the informal economy, as shown in more than 15 percent of the answers (see Figure 9). Licenses and permits were cited as obstacles in only 5.37 percent of the answers in 2007 and 2.09 percent of the answers in 2009.31 Figure 9: Bulgarian Firms do not rate Business Licensing and Permits as one of the top constraints in 2009 (in percent)

Top 10 business environment constraints for firms 17,19 15,25 12,81

Labor regulations

Corruption

Inadequately educated workforce

Tax Rates

Policy Instability

Practices Informal Sector

4,58

3,76

3,42

3,24

Crime, Theft & Disorder

8,14

Tax Administration

8,99

Transportation

13,28

Access to Finance

20 18 16 14 12 10 8 6 4 2 0

Source: BEEPS (2008 ‐ 2009)

The surveyed managers of firms in Bulgaria report a considerable improvement of the state of regulation during the analyzed period. In 2004, more than 23 percent of the managers noted that licenses and permits were among the most significant constraints on the business environment (see Figure 10). In 2008, this share decreased to below 9 percent, which 31

Percentage of firms that chose Licenses & Permits as the biggest obstacle faced by this establishment. Survey respondents were presented with a card that listed 15 potential obstacles. World Bank Enterprise Survey (2007) and BEEPS (2008‐09).

represented a notable improvement.32 From a comparative standpoint, this achievement is remarkable, despite the fact that the tendency is not uniform over the years. For example, in 2002 this share was close to 17 percent, while in 2007 it reached 21.2 percent.33 As per this indicator, Bulgaria is in a very good position among the Eastern Europe and Central Asia countries as well as within the group of countries with above-average per capita income. Figure 10: Share of companies showing regulation as the most significant restraint to business in 2009 (in percent) 45 40,77 40 35

32,67 29,89

30 25 19,44

19,99

21,54

23,41

24,49

24,04

25,19

15 10

8,86

Uk ra in e 20 06 Be la ru s 2 00 6

Ro m an ia

Ka za kh st an

Tu rk ey 2 00 8

Ru ss ia n Fe d.

Lit hu an ia

Po la nd

M ol do va

Bu Bo lg sn ar ia ia & H er ze go vin a

Source: Enterprise Surveys (World Bank). Note: Percentage of firms identifying business licensing and permits as major constraint among the five points scale. The computation of the indicator is based on the rating of the obstacle as a potential constraint to the current operations of the establishment;

3.2.2 Output Indicators The analysis of governmental programs and reports about their implementation yields the following results: 

A total of 25 administrative regimes have been proposed for abolition or simplification during the period April 2008–April 2009. Another 17 administrative regimes (12 regimes subject to simplification and 5 regimes subject to abolition), have been identified in cooperation with the stakeholders. An overview of the implemented administrative regimes has been conducted at the municipal level. This review found that 167 municipal regimes have been revoked within the course of one year;



54 electronic services of high public value have been determined and are to be implemented by 2011;



Three centers have been created in the cities of Sofia, Sliven and Varna to provide assistance to customers via electronic service. A single environment has been created for the exchange of electronic documents. The administrative e-services are to be integrated in it so they can be provided via the e-government portal;



“One-stop shop” servicing has been introduced in 77 percent of the structures of the central administration, in 96 percent of the regional and 82 percent of the municipal administrations;

32 33

See BEEPS (2008-09). See World Bank Enterprise Survey (2007).



The public consultations portal is located at: www.strategy.bg. All proposals for statutory instruments relating to administrative regulation must be published on this portal at least 30 days prior to their submission to a CoM session for approval;



A newly created register, which presents all regulatory regimes, has been established at the following address: www.egov.bg;



398 information obligations have been identified, which have been specified in 33 national laws and the accompanying secondary legislation. Recommendations have been formulated for amendments to five laws, which generate 80 percent of the administrative burden relating to information provisions;



OPAC has financed projects for conducting 14 assessments (seven ex-ante and seven expost assessments) of the regulatory impact of important legislative acts and the work on a report on the institutionalization of impact assessment. In addition, more than 250 officials from the state administration have been trained in conducting impact assessments.

3.2.3

Results Indicators

Several indices that most accurately reflect regulatory conditions have been selected from the WEF competitiveness studies. These are the indicators of the regulatory burden, the effectiveness of the legislative framework and the transparency of policy-making. On these indices, Bulgaria scores between 2.3 and 3.3—with the desired score being the closest possible to zero (see, Figure 11). From a dynamic standpoint, the transparency of policy-making34 reflects worsening of the condition in Bulgaria, although the effectiveness of the legislative framework keeps the same position. Only the regulatory burden indicator reflects dynamic improvement. For this reason, the regulatory burden is ranked first, while transparency receives the lowest mark (see Figure 11). By these indices Bulgaria falls within the least favorable range of the rankings: between 80th and 120th place (see Figure 12). With respect to relative ranking, Bulgaria falls within the second, less favorable half of the ranking—after the 60th place. The same position of the selected indicators is taken both by points and by place within the rankings. By all of the analyzed indicators the country is in a less favorable position of the total competitiveness index. Several indices, which most accurately characterize the dynamics and state of regulation, have also been selected from the competitiveness studies of the IMD (see Figure 13). These are the indicators of bureaucracy, ease of doing business and registration of a company (starting a business). Of these, the index on the impact of bureaucracy reflects the best condition for Bulgaria. The other two indices have values for Bulgaria that fall within the unfavorable part of the graph, fluctuating through the years between 3.7 and 6, given that the maximum value is 7. From a dynamic standpoint, only the index for registration of a firm shows a degree of improvement over the period from 2006 to 2009, as its value is better at the end of the period than at the beginning. The other two indices are worsening a little bit (see Figure 13).

The problem with transparency of policy-making is also confirmed by the 2009 ARC survey. Over half of managers of all types of firms in the ARC Survey said that regulations are applied inconsistently and unpredictably that led to instability in regulatory policy making (see World Bank, 2010a. 25

Figure 11: Decreasing values of WEF’s Burden of Government Regulation and Efficiency of Legal Framework since 2003 and Transparency of Government Policymaking since 2007 4

0 2003

2004

Burden of government regulation

2005

2006

Efficiency of legal framework

2007

2008

2009

Transparency of government policymaking

Source: Global Competitiveness Report (WEF, 2003–2009).

Regarding Bulgaria’s ranking according to the individual indicators, from a dynamic standpoint the country ranks highest with respect to doing business, both in terms of absolute and relative positioning (see Figure 14). Concerning the bureaucracy, the tendency is positive, while in the case of registering a new company, the graph shows an elliptical trajectory and the end values for the period equal the beginning values (see Figure 14). Figure 12: Bulgaria’s Burden of Regulation is falling as per WEF relative ranking, while Bulgaria’s Efficiency of Legal Framework and Transparency of Policymaking are somewhat constant 120 100 80 60 40 20 0 2003 2004 B urden of regulation ‐ rank

2005

2006 2007 B urden of regulation ‐ relative rank

E fficiency of legal framework ‐ rank

E fficiency of legal framework ‐ relative rank

Trans parency of policy‐making ‐ rank

Trans parency of policy‐making ‐ relative rank

Source: Global Competitiveness Report (WEF, 2003–2009).

2008

2009

Figure 13: IMD Indices for Bulgaria of Bureaucracy, Ease of Doing Business and Starting a Business are somewhat similar in 2009 compared to 2006 7

0 2006

2007 B ureauc rac y

2008

E as e of doing bus ines s

2009 S rarting a bus ines s

Source: World Competitiveness Yearbook (IMD, 2006–2009).

Figure 14: IMD’s Bulgaria Ranking of Bureaucracy is Worse Than Starting a Business and Ease of Doing Business 100 90 80 70 60 50 40 30 20 10 0 2006

2007

2008

2009

B ureauc rac y ‐ rank

B ureauc rac y ‐ relarive rank

E as e of doing bus ines s ‐ rank

E as e of doing bus ines s ‐ relative rank

S rarting a bus ines s ‐ rank

S tarting a bus ines s ‐ relative rank

Source: World Competitiveness Yearbook (IMD, 2006–2009).

A valuable indicator of the regulatory burden is the share of time that senior managers report spending on activities relating to regulations. While in 2002 such activities took up 3 percent of senior manager’s time (for manufacturing firms in Bulgaria), this share reached 5 percent in 2009 (see Figure 15). There is a dynamic of this indicator that can be divided into 27

three stages. The first stage, which reflects the condition until 2005, is characterized by a slow increase in the amount of time spent by senior management, reaching 3.4 percent by the end of the stage. A drastic worsening of this indicator is shown during the second stage from 2005 until 2007, which is likely to be an increase due to the compliance with EU requirements. For instance, in 2007 the value of this indicator exceeded 17 percent. The third stage came after 2007, when the time spent by senior management on dealing with regulations fell to 9 percent in 2008. In 2009, this indicator dropped to 5 percent. Figure 15: Time Spent by Senior Managers of Manufacturing Firms in Dealing with requirements of Government Regulations in Bulgaria dropped substantially in 2009 compared to 2007

Source: BEEPS (2002, 2005, 2008‐2009), World Bank Enterprise Survey (2007) and ARC survey (2009) for managers of manufacturing firms in Bulgaria. Note: It should be specified that the question was asked differently in 2008 and 2009, compared to previous surveys. In the former case it was asked what percentage of senior management time is used over a week on dealing with regulations, whereas in the latter case, it was asked what percentage of senior management time is used over 12 months. Please, also note that in the case of BEEPS 2008 surveys the question was asked to the firms that have confirmed that they have applied for Government contract in the last fiscal year while in the previous rounds of BEEPS the question was asked to all firms participating in the survey.

The burden of regulation, however, differs across sectors. In the 2009 Administrative and Regulatory Costs (ARC) Survey in Bulgaria, although the average senior manager of a manufacturing firm reported spending only about 5 percent of his/her time dealing with regulation (see Figure 15), managers of new manufacturing firms and IT firms reported spending longer doing the same thing. In particular, senior management of new manufacturing firms spent 10 percent of their time and the average manager of an IT firm reported that senior management spent about 11 percent of their time doing the same.35 An improvement is evident with respect to the indicator showing the average number of days needed for the issuing of an operating license. While in 2007, 48.3 days were needed for this, in 2009 only 20.78 days were required. The average value for the region of Europe and Central Asia in 2009 is 26.19 days, while for all examined countries, it is 28.93 days. With

For more details about the burden of regulation, see World Bank (2010a)

respect to the level of this indicator in 2009, the country stands well in the context of the Europe and Central Asia region (see Figure 16). Figure 16: Bulgaria has better standing vis‐à‐vis other countries in Europe and Central Asia Region regarding Days to Obtain Operating License in 2009 (in percent) 70

65,45 57,4

56,05

60 50 40 30,83

35,59

33,82

31,01

38,15

36,18

36,02

30 20,78 20 10

ia ua n Lit h

Fe d.

Ru ss ian

ve ni Slo

00 8 ar us 2

Be l

va k ia Slo

8 ke y 2 00 Tu r

ga ry Hu n

R a, FY ni

00 8

M ac ed o

Uk r

ain

e 2

st an Ka za kh

Bu l

ga r ia

Source: Enterprise Surveys (World Bank).

3.3 Status and Dynamics of Qualitative Indicators As mentioned earlier, general limitations in performing the impact assessment render the task of measuring targets set in the LARACEAA very delicate. This necessitated the use of combined methods of analysis. In addition to quantitative analysis of data and information from various national and international sources, a tailored survey was made among representatives of the stakeholders, including business leaders, key experts and representatives of public institutions, and four of the most frequently applied regimes were explored in the form of case studies of three differing in size municipalities. The detailed studies are presented in Appendix 4 (Survey Questionnaire), Appendix 5 (Survey Results) and Appendix 6 (Analysis of Regulatory Regimes at the Local Level).

3.3.1 Achievement of the LARACEAA Objectives: Results from Survey Findings The main usefulness of the survey conducted for this report consists of determining the level of achievement of the Act’s objectives. To analyze this issue, objectives are divided into three groups. The first group contains the objectives that have been achieved. The condition to fall into this group is that the prevailing replies of respondents shell be “fully achieved” and “achieved to a high extent.” The second group includes objectives that have been achieved only partially. In this group, the ratio of respondents who approve, respectively disapprove, the statement that a particular objective is achieved, is equal. The third group consists of objectives that have not been achieved. In this group, the replies of the prevailing part of respondents are either “achieved to a low extent” or “achieved is rather contrary to the objective.” This distribution of objectives is presented in Table 3.

Table 3: Achievement of the LARACEAA Objectives (in percent) Achieved to a high extent

Achieved to a low extent

Reducing sources of corruption by limiting the discretionary power of administration Securing publicity of the work of administrative bodies in applying normative acts related to administrative regulation and control on economic activity, as well as the reasons for their changes

Restricting and reducing publicly unjustified burdening of economic activity Eliminating normative requirements that may reduce competition

Objectives

1. 2. 3.

Achieved is rather contrary to the objective

Fully achieved

Achieved objectives Clear defining of the types of regimes regulating economic activity Protect free economic initiative Clearly define the limits of administrative intervention in economic activity at central and local levels Objectives partially achieved

1. 2. 3.

4. 5.

Facilitate and promote economic activity through limiting to publicly justified limits the administrative regulation and administrative control exercised by state authorities and local governance bodies Restricting the introduction of new regulatory regimes (licensing and registration) by requiring a reason for the necessity for such a regulation and advance notification of affected persons Objectives not achieved Increasing transparency in the introduction of regulatory regimes

Source: Authors' survey (see Appendix 5 for more details).

3.3.2 Case Studies of Regulatory Regimes at the Local Level Review of four regulatory regimes in three municipalities in Bulgaria was carried out to provide specific knowledge of the mechanisms of introduction and implementation of regulatory regimes at the local level. The municipalities of Razgrad, Troyan, and Kyustendil were the objects of the study. The allocation of reviewed regimes by municipalities is presented (see Table 4). The permit regime for performance of taxi transportation—common for all three municipalities—was selected for the analysis. The regime for categorization of hotels was chosen for the Municipality of Kyustendil, trade certificates regime for the Municipality of Razgrad, and the regime for construction permits was selected for the Municipality of Troyan. It should be specified that these cases do not constitute a representative sample of all 264 municipalities in Bulgaria, but the review adds value to the general understanding of how regulatory regimes are handled at the local level.

Table 4: Allocation of Reviewed Regimes by Municipalities Regime for performance of taxi transportation Municipality of Razgrad



Municipality of Kyustendil



Municipality of Troyan



Trade certificates regime

Regime for categorization of hotels

Regime for construction permits

  

Source: Authors’ analysis.

Based on the case studies the following can be concluded:36 Compliance with national legislation. The review of the regulations implemented at the local level indicates that many comply with national legislation and do not constitute special initiatives of the local authorities; Additional requirements are enforced. The local authorities, however, enforce additional requirements that are not directly related to and necessary to facilitate regulated commercial activity. Most common among these are requirements for timely payment of taxes. Such requirements should be abolished from the application procedures; Duplication of documents submitted. Some of the documents required from businesses are issued by the local authorities themselves. This duplication is time- and resourceconsuming for the business. The implementation of a system for information exchange between institutions would solve this problem; Public registers are not used. The municipalities do not make use of public registers as a means to publish the decisions issued in accordance with the regulatory regimes. This would be of considerable use for businesses and citizens in exercising control over the quality of the services provided to them; Fees are not imposed to raise extra funds. Generally, the analysis demonstrates that regulatory regimes examined have no fiscal functions; in other words, the local governments do not impose fees simply to raise funds. The fees cover the expenses relating to the provision of the service. The term for issuing of administrative decisions in accordance with regulatory regimes can be evaluated as being acceptable to the businesses; Unlawful use of registration regimes. The regime for registration of a commercial establishment in the Razgrad municipality is still used in some other municipalities and should be abolished because it is unlawful.

3.4 Summary of Quantitative and Qualitative Analyses The quantitative performance indicators used for measuring LARACEAA’s goal and objectives are placed in three groups: worst performance, showing some progress, and most developed. The indicators showing the worst performance by Bulgaria are those concerning the efficiency of legal framework and transparency of policy making (see Table 5). These are the indicators that are the bottlenecks of regulation in Bulgaria and require special attention in the future. A second group of indicators show some progress. These include the overall burden of regulation, bureaucracy, and ease of doing business, among others. These 36

See Appendix 6 for more information. 31

indicators also need special measures for further improvement. The third group consists of indicators that are the most developed. For instance, these are the share of firms identifying business licensing and permits as major constraints, product market regulation index, the number of regimes proposed for abolition or simplification, the average number of days needed for the issuing of an operating license, etc. These indicators need to be further sustained and strengthened. Table 5: Summary Matrix of State and Dynamics of Quantitative Performance Indicators Indicators Outcome Indicators Global competitiveness index of WEF  Competitiveness index of IMD  Doing Business Index  Product market regulation index  Share of firms identifying business licensing and  permits as major constraint Output Indicators Number of regimes, proposed for abolition or  simplification Number of e-services to be implemented  Introduction of one stop shops and centers for e services at regional and local level Establishment of Administrative register  Identification of legislation that generate  administrative burden related to information provision Number of prepared IAs  Results Indicators Overall burden of regulation  Efficiency of legal framework  Transparency of policy making  Bureaucracy  Ease of doing business  Starting a business  Time spent by the senior management in dealing  with regulations Average number of days needed for the issuance  of an operating license

State

X X

Dynamics

   

   



















     

     







Source: Authors’ analysis. Notes:  ‐ positive dynamics or high level  ‐ negative dynamics or low level  ‐ neutral dynamics or middle level  ‐ not available

Good level and positive dynamics X

Certain progress in level of development and dynamics is shown Low level of development, no progress or negative dynamics

Other observations as a result of the qualitative analysis to be emphasized: Transposition of EU regulations added additional administrative and regulatory burdens. The country’s accession to the EU and the rapid introduction of regulations, which stem from the acquis communautaire during the period of analysis and evaluation, exert an influence over the condition and dynamics of administrative regulation of business. The regulatory and administrative burden for business has increased as a result of EU regulations;

Partial achievement of the LARACEAA’s objectives. The assessment indicates that the goal of LARACEAA (placing publicly justified limits on administrative regulation and control of business and raising the national competitiveness) has been only partially achieved. The Act also has achieved only some of its objectives, among them: (i) “Clear definition of the types of regimes regulating economic activity,” (ii) "Protect free economic initiative”, and (iii) “Clearly define the limits of administrative intervention in economic activity at central and local level”; A number of important objectives set out in LARACEAA have not yet been achieved. Objectives of the LARACEAA that have not yet been achieved include: (i) “Increase transparency in the introduction of regulatory regimes,” (ii) “Reduce sources of corruption by limiting the discretionary power of administration,” (iii) “Secure publicity of the work of administrative bodies in applying normative acts related to administrative regulation and control on economic activity, as well as of the reasons for their change,” (iv) “Restricting and reducing publicly unjustified burdening of economic activity,” and (v) “Eliminate normative requirements that may reduce competition”; Bulgaria’s Better Regulation Policy has not been carried out consistently and systematically; improvements have been slow. Therefore there are peaks and valleys in the results of regulatory reform. The level of national competitiveness is still low compared to other EU members and developed countries. However, the dynamic of most indicators displays slow tendency toward improvement; Limited increase of the number of licensing regimes. In the analyzed period licensing regimes increased from 39 to 42, which resulted from the implementation of five new regimes and the abolition of two regimes. Seven amendments and supplements were made to six regimes throughout the period; Business regulations are not the most important problem facing business. Recent business surveys found that regulations represent an important—but not the most important—problem facing business. Besides the volume of introduced legislation, the major cause of dissatisfaction with the government among the business community is the organization and quality of services provided by the government and its agencies. Apart from regulations, the limited access to finance and the prevalence of the informal economy are the major problems facing business; Local authorities enforce unnecessary burdens on business and they do not make use of public registers. The review of regulatory regimes enforced at the local level indicates that many of them evolve from national legislation and thus do not constitute special initiatives by local authorities. The local authorities, however, collect available information and useless requirements that are not directly related to the decision to issuing a permit. The municipalities also do not make use of public registers, which are required by the Act, to publish decisions relating to the regulatory regimes. In addition, illegal implementation of a commercial establishment registration regime within one of the municipalities under review was evidenced.

CHAPTER

MAIN PROBLEM, DRIVERS AND EFFECTS OF THE PROBLEM, AND RECOMMENDED AMENDMENTS TO THE LARACEAA LARACEAA has exerted a favorable influence by reducing regulatory and administrative burdens on business, but the Act needs to be amended to function better. Despite the progress in reducing regulatory and administrative burdens, a multitude of obstacles continue to exist for the Act’s enforcement, thus necessitating its amendment. Based on the ex-post impact assessment of LARACEAA, this final chapter identifies the main problem, discusses underlying drivers and effects of the problem and proposes key recommendations to amend the Act in three particular areas: instrumental, institutional and economic. Major Problem Identified: Broad state intervention in economic activities as manifested by the presence of a large number of regulatory regimes introduced by special laws that result in reduced transactional efficiency and competitiveness of the economy.37

4.1

Underlying drivers of the problem (“roots of the tree”)

Limited scope of the Act. The Act stipulates the main principles of regulatory impact by distinguishing between two types of regulations: (i) licensing and registration regimes and (ii) separate deals or single actions that refer to individual deals. However, most regulation of business remains beyond the scope of the Act and is covered by the Administrative Procedures Code and other special laws. Limited application of the principle of “silent consent.” Art. 28 of the Act provides that this principle (which means that a business application is presumed to be approved unless it is denied within a certain period of time) relates to the issue of permits and certificates for individual deals or actions, unless otherwise provided by another law. The research indicated that, in general, special laws avoid the application of the principle of “silent consent.” Only six laws apply this principle. Adoption of a new regulatory regime is not preceded by the development of an ex-ante impact assessment as required by the Act. No ex-ante impact assessment is ever made during the drafting and submitting of new regulatory regimes. This is required by Art. 3, paragraphs 4, 5 and 6 of the Act for licensing and registration regimes. The Act also provided that the impact assessment should be published on the Internet or made public in another adequate way; this also is not the practice. Most of the 16 amendments to the Act relate to the introduction of new regulatory regimes, and no evidence has been discovered that this requirement of the Act has been fulfilled.

The problem is defined on the basis of its manifestations identified in the analysis of objective information, careful study and research of documents, as well as by meetings and discussions with interested parties.

Inadequate institutional framework. The Act does not have an adequate institutional framework. This results from three main factors: 

Lack of an effective sanction and control system for enforcing the Act. Although a sanction and control system has been created to ensure that public officials carry out their duties as defined in the Act, it is non-functional and not applicable, since the responsibilities to impose sanctions are assigned to the heads of administrative structures. As per Art. 30 (1) of the LARACEAA, the mayor or the minister is to impose a fine of BGN 1,000 (EUR 500) to 5,000 (EUR 2,500) on an official of his/her own administration, unless another sanction is applied. Hence, there is no external sanction or control mechanism over civil servants. This makes it likely that delays or mistakes by civil servants will go unpunished. An additional disincentive for sanctions is that the amount of a possible fine is very high. Another factor is that businesses are subject to numerous inspections resulting from multiple types of administrative regulations; this increases the possibility that one or more officials might violate the terms of the Act.



Lack of a truly functional united register of administrative regimes. The Act contains only a list of licensing regimes and the requirement that all administrative bodies that issue licenses and make registrations shall keep a special register for each procedure. Our research into 41 existing licensing regimes indicated that in 12 of them either no register is available, or a register exists but is not publicly accessible as is required by the Act (see Appendix 7). Attempts so far to build such registers have achieved only partial success. The first to be created was the Register of Administrative Structures and Administrative Acts at the Internet address www1.government .bg/ras/regimes/index.html. Though still accessible on the Internet, this Register has not been updated recently. It lacks a list of introduced registration regimes, procedures on different regimes are not presented, and the classification of regimes is not correct (e.g., so-called coordination regimes exist). The other functioning register, which can be found at www.egov.bg, is better structured and technically presented. However, the listed regimes are not grouped and classified correctly. In addition to the regimes determined by the Act, there are also regimes for permission, notification, certification, etc. Information on the site is not regularly updated. For instance, it still contains the procedure for issuing licenses to expert evaluators, even though such licenses have been abolished. Internet links are missing to institutions responsible for carrying out the procedures. Although the site was designated a single point of contact under Directive 2006/123/ЕC, it lacks the required functionality to serve the purpose and availability of English version.



No official authority "owns" responsibility, under the Act, for its implementation, to control its performance or to suggest necessary amendments. The lack of such responsibility can hardly be compensated by the general administration of the CoM, or another functional or line ministry. Given the findings of this report, the Act has not been incorporated as an integral part of a general strategy for reduction of administrative burdens on business and restricting bureaucratic interference. This activity demands constant efforts on behalf of the state, since bureaucracy shall never voluntary surrender its powers and prerogatives. The lack of a structure with responsibility for the Act was noticed only in 2009, when an unsuccessful attempt was made to place the Minister of Justice and the Minister of Finance in that role. Subsequently, this was determined to be a non-realistic solution, and an amendment for the abolition of this “still-born” text of the Act was introduced.

4.2 Effects of the problem High costs to businesses related to applying for and obtaining licenses, registrations, permits, and certificates. These costs have both a financial measure and a measure for the loss of valuable time. In financial terms, most important are the losses resulting from the fees for permits. Sometimes these fees are in no way related to the real costs of services delivered to business and are used rather as a tool for redistribution of income in favor of the bureaucratic machine.38 In this way, services are double-financed: first, tax-payers pay and the budget distributes resources for administrative services to business and, second, the same service is financed again in the form of additional material incentives to officials in administration. Procedures for issuing registrations, permits and certificates are not transparent. Applying companies do not receive adequate information on the course and progress of the procedure. Use of flow charts to analyze procedures is not utilized in government agencies. Even a simple analysis of any procedure can determine how slow and intertwined documentation is among different units; how many unnecessary units process the files, and how valuable resources are wasted in unnecessary operations. The optimization and rationality approach is applied neither in the creation nor in the application of procedures. Applications are not always dealt with in the order received; for example, a company that has filed its permit application later might obtain a decision before a company that had filed an application earlier. This has potential serious ramifications as follows: 

Creating possibilities for corruption. The lack of transparency always creates possibilities for corruption, since the mechanism of external control is absent, as is selfcontrol of administration activity.



Enabling a strong bureaucracy to make unreasonable demands. Even though a bureaucracy could obtain information about the legal status of a company from its own public registers, it might require the company to produce such documentation on its own, thus resulting in unnecessary expense and duplication. In another example, the bureaucracy would not allow an applicant simply to declare the lack of a previous criminal conviction. Instead, a certificate is required by a court of this fact, thus requiring at least two visits to the court, payment of a significant fee, together with the monopoly commission of the service bank to transfer the amount of the fee to the court’s account.

The high share of informal economy is the result of heavy burdens imposed by administrative regulation and administrative control. This implies losses in public welfare and demands greater public resources for control and sanctions on companies in the shadow economy. The large shadow economy has a bad influence on the business environment and business ethics because it places legitimate firms in disadvantageous competitive position. The unlawful introduction of regulatory regimes by local authorities also stifles entrepreneurship. The worsened business climate is reflected in lower investment activity and reduced competitiveness of the economy.

For example, the fee for registration of a pharmacy was BGN 5.000 since 2000. This led to lack of pharmacies in the village areas. After the amendment of the Law on Medicinal Products for Human Use from December 2009 this fee was reduced to BGN 1.000 but only for towns and villages with less than 10.000 inhabitants, although the administration of the regime is one and the same in different settlements. 36

The following figure visually depicts the main problem, drivers of the problem and effects of the relationships. Figure 17: Problem Tree

Source: Authors’ graph.

4.3 Key Recommendations LARACEAA

for

Amendments

the

To address the inherent weaknesses of LARACEAA and the need to realize larger benefits from it, three sets of amendments to the law are recommended. These amendments would: (i) improve its administrative provisions (instrumental amendments); (ii) strengthen its institutional support (institutional amendments); and (iii) introduce new rules for calculation of administrative fees (economic amendments). Detailed recommendations are provided below: Instrumental amendments  Introduction of new key principles (e.g., avoidance of duplication of submission of identical documents to both central and local authorities) of administrative servicing in the Act relevant to all relationships between businesses and the administration;  Application of the principle of “silent consent” in the area of registration regimes;

   

Broad implementation of declarations of compliance by applicants, along with suitable mechanisms for verifying those declarations, instead of requiring official documents issued by a Court or other administrative bodies; Establishment of a minimum time period during which an applicant for a license or permit can correct mistakes on the application; Improved oversight and control of the sanctioning mechanism within the administration and reduction of the burden on controlled entities; Introduction of instruments enabling an analysis of whether proposed regulatory regimes comply with the three groups of criteria under the LARACEAA (national and personal security, human and property rights, and environment).

Institutional amendments  Establishment of a unit within the administration of the Council of Ministers that would oversee implementation of the Act and impose sanctions when public administration officials violate it;  Establishment of a uniform Administrative Register of regulatory regimes to provide easily accessible information and advice on all procedures and required documents.   

Economic amendments Introduction of additional principles for setting charges for administrative services; Regulation of the amount of the charges on the basis of adopted rules; Introduction of the principle "one procedure – one charge." Surcharges should be prohibited when additional actions are required for an applicant to correct mistakes or as an incentive for administrative officials to perform their jobs.

These recommendations and proposed amendments may help the Bulgarian authorities use the LARACEAA to further advance regulatory reform. But they should proceed in parallel with other actions under Bulgaria’s Program on Better Regulation and related initiatives. An improved Act can become a powerful means of reform only if it is part of those broader efforts and has political support at the highest levels.

REFERENCES Bulgarian Industrial Association (2007). Existing Regimes on the business activities. BIA report: Sofia. Djankov, Simeon, Caralee McLiesh, and Rita Ramalhoр (2006). Regulation and Growth. World Bank: Washington DC, accessible at: SSRN: ssrn.com/abstract=893321. European Commission (2009). Impact Assessment Guidelines. SEC (2009) 92. European Commission (2007). Spillovers and complementarities in the context of the Lisbon Growth and Jobs Strategy including economic effects of the Community Lisbon Program. Commission Staff Working Document. IMD, World Competitiveness Yearbook, 2006-2009. Jacobs & Associates and Institute of Market Economics (2009a). Development of Capabilities for Conducting Impact Assessment of Regulations and Policies. Document prepared for the Better Regulation Unit at the Council of Ministers Administration, financed by the European Social Fund. Accessible at www.strategy.bg. Jacobs & Associates and Institute of Market Economics (2009b). For Better Public Management: Institutionalization of the Process of Impact Assessment of the State Administration. Document prepared for the Better Regulation Unit at the Council of Ministers Administration, financed by the European Social Fund. Accessible at www.strategy.bg. NRR (2009). Regulation Indicator 2008. Better Regulation for Business in Sweden: an evaluation of government initiatives, June 2009 www.nnr.se/assets/files/publikationer/NNR_Regulation_Indicator_2008.pdf. NRR (2008). The Total Cost of Regulations to Businesses in Sweden.The Total Cost of Regulations to Businesses in Sweden, January 2007 www.nnr.se/assets/files/publikationer/nnr_thetotalcostofregulations.pdf. SIGMA (2001). Improvement of the Political Instruments Through Impact Assessment. SIGMA Paper No.31. OECD: Paris. Schatz, M., M. Schiebold, S. Kiefer, H. Riede (2009). Handbook for Measuring Regulatory Costs. KPMG, 2009. www.bertelsmann-stiftung.de/cps/rde/xbcr/ SID-33E14E80-2D201348/bst_engl/xcms_bst_dms_29039_29040_2.pdf Wolfl, Anita, I. Wanner, T. Kozluk, and Giuseppe Nicoletti (2009). Ten Years Of Product Market Reform In OECD Countries - Insights From A Revised PMR Indicator. Economics Department Working Papers No.695, OECD, 2009. World Bank (2010a). Bulgaria: Administrative and Regulatory Barriers to Business. Report No. 55727BG. Washington DC: World Bank. World Bank (2010b). Policy Note on Private Sector Development, in World Bank, Mapping Bulgaria’s Future: Inclusive Growth and Productive Jobs. Washington: DC. World Bank (2009). Bulgaria: Reforming the Regime of State Fees. Report No.55729-BG. Washington DC: World Bank. World Bank (2008). Bulgaria: Investment Climate Assessment.World Bank: Washington DC. World Bank (2007). Product Market Regulation in Bulgaria: A Comparison with OECD Countries, Policy Research WP 4393. World Bank, Doing Business 2004-2010. World Bank: Washington DC. World Bank and EBRD, BEEPS, 2002, 2005, 2008-2009. World Bank Enterprise Survey, 2007. World Bank: Washington DC. World Economic Forum, Global Competitiveness Report, 2004-2009.

Laws, Ordinances and other Documents reviewed: Commercial Register Act, SG. No34/ on April 25, 2006, amended, SG, No44/on 12.06.2009. Council of Ministers (2010). Convergence Program 2009-2012. Document of the Government of Bulgaria. (2009a). Governmental Program for European Development of Bulgaria 2009-2013. Document of the Government of Bulgaria. (2009b). Setting and Measuring the Administrative Burden, Stemming for the Information Obligation of the Business and Recommendations for their Limitation. Report of Consortium “Project: Administrative Burden on the Business” for the Ministry of Economy and Energy. (2006). Decision 482, 2006. (2002a). Decision 866, December 28, 2002. (2002b). Motives to the Draft LARACEA Law, No. 202-01-85/09.12.2002. Decision of the CoM on May 8, 2009. Ministry of State Administration and Administrative Reform Report on the State of the Administration in 2008. Decision of CoM No. 705, August 31, 2009.Electronic Governance Act (2007). Promulgated SG 46/June 12, 2007. Independent Evaluators Act (2008). Promulgated SG 98/ November 14, 2008. Limiting Administrative Regulation and Administrative Control on Economic Activity Act. SG (55), June 17, 2003 and Guidelines for Application of the Limiting Administrative Regulation and Administrative Control on Economic Activity Act. Document of the Council of Economic Policy at the Council of Ministers of Bulgaria. Ordinance No.192 of the CoM for the establishment of the Council on Administrative Reform. SG (64), 2009. Rules and Procedures of CoM and its Administration, SG, No. 10/2009 from 6.02.2009. Structural Statute-book of the CoM and its Administration, SG (10), February 6, 2009. Internet sources: www.worldbank.bg. www.egov.bg www1.government.bg/ras/regimes/index.html. www.esc.bg/viewpoints.php?lang=0 Statement on Opportunities for Decreasing the Administrative Restraints and Improving the Business Environment in Bulgaria. Document of the Economic and Social Council of the Republic of Bulgaria (as of March 2009) www.strategy.bg Government strategic and specific documents to be found, including seven ex-post impact assessments of the following acts: Investments Promotion Act, the Waste Management Act, the Child Protection Act, the Law on Drugs in Human Medicine, the State Fees Act, the Local Taxes and Fees Act, and the Social Assistance Act. Another seven ex-ante impact assessments have been conducted through consultancy work on the draft Act on Amendment and Supplement (AAS) of the Law on Measurements, the draft AAS of Investments Promotion Act, the draft AAS of the Waste Management Act, the draft AAS of the Law on Foods, the draft Act on Hydro-meliorations and Irrigation Agriculture; the draft of AAS of the Law on Health Institutions, and the draft Law on Public Libraries.

APPENDICES Appendix 1: Licensing Regimes’ Compliance with the Requirements of the LARACEAA

Licensing regime / criteria

1. 2. 3.

4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

21.

22.

Banking activity, electronic money activities, payment institution activities, as well as system operator of payment systems activities. Insurance activity and insurance broker activities. Regulated securities market activity, investment mediator, investment or management company as well as a joint-stock company with a specialized investment goal. Additional voluntary and mandatory pension security activities and actuarial activity for servicing of pension security companies. Voluntary social security activities for the unemployed and/or professional qualification. Health security activities. Stock market activities. Customs agent activities. Duty-free trade. Gambling activities. Production, transportation, trade and foreign trade activities relating to weaponry, explosive and military supplies as well as certain supplies and technologies with dual-use. Private security activities. Activities relating to drafting, manufacturing, import, trade, repair, installation and maintenance of fire precaution equipment, activities relating to emergency and fire safety, ignitable and explosive activities. Manufacturing of compact disks (optical disks) and/or matrixes for them. Medical institution activities relating to hospital care, clinics and homes for medical-social care. Clinical studies, manufacturing, trade or import of medical and curative products. Production, processing, transportation, trade, import, export, transit and storage of narcotic substances for medical and veterinary purposes and precursors. Industrial processing of tobacco and production of tobacco products. Technical surveillance of hazardous installations, examination of measurement equipment. Production of alcohol, distillates and alcoholic beverages. Production and preparation of sowing and planting material for agricultural plants, variety of examination activities for agricultural plants, used for sowing and planting material, distribution and trade with seeds and planting material that deviates from the minimal quality requirements. Public warehouses for grain and grain depository activities.

National security, public order and sovereignty

Personal and property rights of citizens and LP





Environ -ment

 



   

 

























 41

APPENDICES

Licensing regime / criteria

23.

24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42.

Obtaining, processing and storage of sperm and ova, transplantation of embryos in artificial insemination centers and centers for embrio transfers as well as breeding association activities relating to selection and production within the veterinary medicine system. Manufacturing and usage of veterinary medical products, retail and wholesale trade of veterinary medicinal products and transportation of animals. Commercial Fishery Commercial activities with wastes from ferrous and non-ferrous metals Activities in the energy sphere Activities, related to utilization of nuclear installations, nuclear material and other sources of ionizing radiance Construction supervision on construction sites Railway transportation of passengers and/or freight and inspection of the technical condition of the carriages and the legal capacity and qualification of the personnel Public transportation of passengers and freight via automobile transportation, including international transportation Inspection of the technical condition of the means of road transportation; repair and technical servicing of those means A universal postal service or services which fall within the scope of the universal postal service Postal money transfers Airport operator activities; ground services operator or airline carrier Technical servicing and repair of aviation technology Production, import and/or distribution of radio transmission devices for civil purposes Radio and television activities Freight transportation along internal water-ways Provision of social services to children Conducting and certifying of vocational training Informing and conducting of vocational orientation Legend Key:  - very high compliance level  - high compliance level  - presence of compliance

National security, public order and sovereignty

Personal and property rights of citizens and LP

Environ -ment













 



 

 

   



Appendix 2: Information on the Status of Regimes under the Better Regulation Program (2008-10) Regimes under Facilitation

Responsibility of

Simplification Procedure

Law

Status

1. Licensing of commodity exchange activities

The replacement of the license regime for carrying out commodity exchange and clearing house activities with a registration regime is envisaged.

Law on commodi ty exchange s and marketplaces

MEET

No changes. Draft amendment law of the Law on commodity exchanges and market-places – postponed by Protocol №28 of 17.07.2008. Published on the Public consultations website: www.strategy.bg

2. Licensing of carriers for transportation of animals

Replacement of license with registration regime. Amendments to Art. 165 of the Law on the veterinary activity are envisaged. Para. 1, b. 2 and 4, requiring provision of documents that the administrative authority is also obliged to dispose with, have been abolished. By shifting towards registration regime, the administrative authority has no option to refuse the activity execution on expedience any more, and, according to Art. 14, para.1 of the Limiting Administrative Regulation and Administrative Control on Economic Activity Act, it will be obliged to give permission for this activity provided that the normative requirements have been fulfilled.

Law on veterinar y activity

MAF

Simplified. Draft amendment law on the Law on the veterinary activity approved by CoM with Decision №699 from 06.11.2008. The regime has been simplified as described in column 2. The draft amendment law was submitted to the National Assembly on 07.11.2008 I reading on 12.03.2009 Stage - discussion Published on the Public consultations website: www.strategy.bg

3. Licensing of wholesale trade with veterinary medical products

Replacement of license with registration regime. It is envisaged to make an amendment in Art. 364 of the Law on veterinary activity. By shifting towards a registration regime, the administrative authority has no option to refuse the activity execution on expedience any more, and, according to Art. 14, para.1 of the Limiting Administrative Regulation and Administrative Control on Economic Activity Act, it will be obliged to give permission for this activity provided that the normative requirements have been fulfilled.

Law on veterinar y activity

MAF

4. Licensing of wholesale trade with veterinary medical products

Replacement of the licence with registration regime.It is envisaged to make an amendment in Art. 375 of the Law on veterinary activity. By introducing registration regime, the administrative authority has no option to refuse the activity execution on expedience any more, and, according to Art. 14, para.1 of the Limiting Administrative Regulation and Administrative Control on Economic Activity Act, it will be obliged to give permission for this activity provided that the normative requirements have been fulfilled.

Law on veterinar y activity

MAF

APPENDICES Regimes under Facilitation

Simplification Procedure

Law

Responsibility of

Status Published on the Public consultations website: www.strategy.bg

5. License for vocational education and vocational orientation

It is envisaged to prepare a draft amendment law of the Law on vocational education and training that will provide for revision and facilitation of the procedures for licensing of vocational education centers and information and professional orientation centers, as well as for revision and facilitation of the application forms for both procedures. It is also envisaged to amend the license of vocational education centers and information and professional orientation centers fee tariff, collected by the National agency for professional education and training. The administrative regime will be facilitated by introduction of two new steps in the tariff at the stage of candidate’s proposal evaluation (at the start of the procedure) – fees for candidates with one profession and for candidates with 2 to 6 professions.

Law on vocationa l education and training

MEYS/ MLSP

6. Permit of performance of activities including collection, transportation, temporary storage, preliminary treatment, utilization and/or rendering harmless of waste

The amendments in the Law on waste management envisage: 1. Excluding from the permission regime the most often demanded permissions for performing activities with dangerous waste, namely their temporary storage on the place of origin. 2. Shortening by ½ the deadlines* for concerting the Programs for waste management activities – new paragraphs 7, 8 and 9 have been created in Art.30 that set up those shorter deadlines. * At present the deadline is 30 days. 3. Reduction by 30 days of the overall duration of attaining approval for the Company waste activity programs, and in case of a single return for missing details completion – to maximum 75 days: A removal of a stipulation currently in force has been proposed (Art.30, para. 4 - „The director of the regional inspectorate for environment and waters, on which territory is the seat of the persons as per the commercial register, shall approve the draft program after receiving statements about their co-ordination by the regional inspectorates for environment and waters, on which territory the activities are implemented.”)

Law on waste managem ent

MOEW

Simplified. With Decision №116 from 26.02.2009. на The CoM has approved a draft amendment Law on vocational education and training. The changes envisage a simplification of the license issuing procedure. The requirement for the managing committee of NAVET to pass judgment on the issuing of the license is abolished, since the director of NAVET passes judgment on that. The deadline for passing judgment is decreased from 4 to 3 months. A regulated deadline for dealing with incompleteness of the documents is envisaged. The procedure for issuing of licenses or license refusal will be amended. It is envisaged to establish a register of licenses issued. The draft amendment law was submitted to the National Assembly on 27.03.2009 I reading on 27.03.2009 Stage - discussion Published on the Public consultations website: www.strategy.bg Envisaged for consideration. 1.Draft amendment law prepared. 2. The change in the administrative regime – approval of the programs for waste management is included in the draft amendment Law on Waste Management The draft amendment law on the Law on waste management is included in the Legislative Program of the CoM for consideration on 25.06.2009

Ex‐Post Impact Assessment of the LARACEAA APENDIX 2 Regimes under Facilitation 7. Permit of organization on utilization

8. Licensing of persons who import, sell, pack and wrap products for plant protection with commercial purpose or perform plant protection services

Responsibility of

Simplification Procedure

Law

Status

MOEW Position: "The waste management organisations are specific legal entities that have some modalities with regard to other commercial entities. First, they accumulate public funds ceded by the government. Second, they are non-profit. Third, they are allowed to spend the accumulated funds only on specific purpose and are subject to annual auditing for this. Hence they have to remain on permission regime." The amendments on the Law on plants protection as of 28.03.2006 with regard to the permission regime are in contradiction with the LARACEAA since the permission is issued for each separate deal or activity, while substantially this is a registration regime. In the period 2008-2010, no facilitation of the permission regime for trade and re-packaging of plant protection products is envisaged. The regime for performing plant protection services has already been abolished.

Law on waste managem ent

MOEW

No changes. MOEW does not envisage abolition of the permission regime

Law on plants protectio n

MAF

No changes. MAF does not envisage abolition of the permission regime for persons who import, sell, park and wrap products for plant protection or perform plant protection services. The regime for providing plant protection services has been abolished. Promulgated. SG, issue 26/2006

9. Registration of sites for rendering harmless of animal side products and sub-products

Shift towards approval of objects in line with the stipulations under Regulation 1774/2002/ЕО. The approval procedure is described in Art. A29, para. 2, which refers to the approval procedure under Art. 228, para. 2-7. The regime is facilitated by introducing a significant reduction of the approval deadlines.

Law on veterinar y activity

MAF/ MOEW

10. Permits of persons for conformity assessment of construction products

A draft Ordinance on amendment of the Order on essential requirements for buildings under construction and for assessment of building materials’ compliance is prepared. The amendments are related to the reduction of the number of documents required as well as of the deadline for issuing permission based on compliance assessment, in case the candidate provides copies of validated certificates for accreditation for the same scope of products, standards, and competencies as the ones it applies for.

Law on products technical requirem ents

MRDPW

Simplified. CoM Ordinance № 225 from 10.09.2008 Simplification and amendment to the Order on essential requirements for buildings under construction and for assessment of building materials’ compliance.

11. Permit of occasional transportation

An amendment in the Law on road transport is envisaged aimed at making more precise the texts requiring administration approval for casual bus transport. Yet, the measure will be preserved on its whole.

Law on road transport

MTITC

Envisaged for Consideration Draft amendment law is prepared. Meeting of MTITC with stakeholders is conducted, agreement has not been reached. Forthcoming inclusion into the Legislative Program of the CoM.

APPENDICES Regimes under Facilitation

Responsibility of

Simplification Procedure

Law

12. Permit of taxi transportation

According to a draft Law on amendment of the Law on road transport, the registration will no longer be under responsibility of the Ministry of Transport, respectively the “Road Administration” Executive Agency; it will be carried out by the correspondent municipalities (upon issuance of permission). Thus, the Municipality Council will locally define the number of taxi vehicles as well as the terms and conditions for their operation.

Law on road transport

MTITC

Envisaged for Consideration Draft amendment law prepared. Meeting of MTITC with stakeholders conducted, agreement has not been reached. Forthcoming inclusion into the Legislative Program of the CoM.

13. Categorization of tourist sites

The draft Law on amendment of the Law on tourism introduces amendments in Art. 50, para.2 that aim to abolish the categorisation of the establishments for catering and entertainment.

Law on tourism

State Agency of Tourism

14. Licensing of expert evaluators of different types of assets

The draft Law on independent evaluators envisages replacement of the existing license regime with a registration one, and the regulation of the independent evaluators to be carried out by a professional association – the Chamber of independent evaluators.

Law on independ ent evaluator s

MEET

15. Licensing of operators of airport ground operations

Position of МТ: After consultations with the EC on issues regarding the access to ground services market it has been clarified that at present it is not possible to remove the license of ground service operators. Hence it is necessary to consider the possibility provided by Directive 96/67, according to which the General Directorate „Civil Aviation Administration” gives approval before the ground service supplier starts operating on a certain airport market. Such an approval will be issued under clear criteria as stipulated by Directive 96/67, and will be related to its principles according to Art.14, para. 1 of the Directive. Unlawful regime contradicting Art. 14, para. 1 of the Limiting Administrative Regulation and Administrative Control on Economic Activity Act.

Law on civil aviation

MTITC

Abolished. With Decision №47 from 29.01. 2009 of CoM the regime for categorization of establishments for catering apart from shelter spots has been abolished The draft amendment law was submitted to the National Assembly on 30.01.2009 I reading on 12.03.2009 Stage - discussion Simplified. Decision №462 from 15.07.2008 of CoM. This regime is transferred for self-regulation by a branch association. The draft amendment law was submitted to the National Assembly on 16.07.2008 Approved on 30.10.2008 Promulgated in SG issue 98/2008 No changes. МТ does not envisage consideration of this regime

Municipa l ordinance s

MSAAR

16. Registration of a commercial establishment

Source: Authors’ research, as of January 2010.

Status

The regime has been administrated by 140 municipalities by April 2008. By March 2009 the regime is abolished in 110 municipalities in Bulgaria.

Appendix 3: Implementation of the Measures Under the Better Regulation Program (2008-10), as of April 2009 Operative Goals and Measures

Term

Responsibility of

GOAL 1. ABOLITION AND SIMPLIFICATION OF THE ADMINISTRATIVE REGIMES Measure 1.1. Abolishing and simplifying the administrative regimes recommended by business in compliance with the Appendix: - decision of the Council of Ministers for the abolition or simplification of regimes - preparation of the necessary amendments to the statutory instruments

04.2008

CoM

05.2008

MEET, branch ministries

Measure 1.2. Conducting systemic evaluations of the administrative regimes and of As of 04.2008 the administrative boundaries before the realization of commercial activities in cooperation with the stakeholders (employee organizations, branch associations and X other).

CoM, branch ministries

Measure 1.3. Examination, preparation and implementation of alternative forms of regulating

permanent

CoM, branch ministries, economic and social partners, NAMRB

Measure 1.4. Legislative order and transfer of part of the functions relating to the regulation of commercial activities to the unions on the basis of tender procedures

2008-2010

CoM, MEET, branch ministries

Measure 1.5. Submitting a recommendation to the Council of Ministers for decreasing the unnecessary administrative burden on business, stemming from the information provision requirement under the existing national legislation, which is not engaged in the implementation of the European legislation

09.2008

MEET, CoM

- determining a portfolio of electronic services with high public value

end of 2008

MSAAR

- defining the areas of integration of electronic services and setting criteria for their integration

end of 2008

MSAAR

- improving the functionality of the e-government portal

end of 2008

MSAAR

- drafting, preparing and implementing of integrated services

end of 2008

Branch ministies, MSAAR

- single provision of information to the administration by citizens and business

end of 2008

All administrative structures

- control and administrative responsibility in cases of non-adherence to administrative servicing deadlines;

permanent

- broadening the scope of action of the “silent consent” principle;

2008-2010

Directors of administrative structures; administrative courts Directors of administrative structures

- strengthening the control by the regional director over the law-abidance of the municipal council acts relating to the implementation of the administrative regimes;

06.2008

Measure 1.6. Integrating services in accordance with the “life episodes” and “business еvents” principles with the aim of simplifying the access and provision of complex services.

Measure 1.7. Improving the quality of administrative services

CoM, MSAAR

APPENDICES Operative Goals and Measures

Term

Responsibility of

- introducing an evaluation of the work of employees responsible for applying the regulatory policy.

12.2008

MSAAR, CoM

Measure 1.8. Ensuring the transfer of databases and installation of integrated information systems

2008-2010

MSAAR

GOAL 2. ESTABLISHMENT AND CONSOLIDATION OF THE INSTITUTIONAL STRUCTURE FOR THE APPLICATION AND CONTROL OF BETTER REGULATION POLICY Measure 2.1. Establishing and consolidating the capacity of a Better Regulation Unit within the administration of the Council of Ministers - structuring the unit and determining its functions

06.2008

CoM

- training experts from the Unit in the implementation of methodological management of the ministries during impact assessment

06-11.2008

CoM, MSAAR

06.2008

CoM

06.2008

CoM, branch ministries, state agencies, executive agencies

Until 12.2008

CoM, MEET, MSAAR, MF, MLSP, MOEW, МJ

Until 12.2008

CoM, MEET, MSAAR MF, MLSP, MOEW, МJ

- setting criteria for selection of drafts of statutory instruments, for which complete 12.2008 preliminary impact assessments are conducted as well as of an order and conditions X for planning such assessments in the course of developing the legislative program of the CoM. - amendments to the Limiting Administrative Regulation and Administrative 12.2008 Control on Economic Activity Act (toward improving the control mechanism and others), the Law on Statutory Instruments (toward implementing a mandatory X preliminary impact assessment), the Structural statute-book of the Council of Ministers and its administration (aimed to determine the functions of the Better Regulation Unit in relation to the application of the better regulation policy), the Law on Administration, etc. - initiating the implementation of the preliminary (ex-ante) impact assessments As of 04.2008

CoM, MEET, MSAAR MF, MLSP, MOEW, МJ

- initiating the implementation of mandatory impact assessments in accordance with the developed criteria and methodology

As of 01. 2009

CoM, branch ministries

- conducting follow-up (ex-post) impact assessment

As of 09.2009

CoM, branch ministries

Until 12.2008

CoM, MEET, MSAAR and IPAEI

- improving the coordination of the Better Regulation Unit with the civil society structures, forming sectoral working groups, which include representatives of business organizations;

Measure 2.2. Determining the functions of the central administrations of executive authorities in relation to the implementation of the better regulation policy and impact assessment

Measure 2.3. Implementing impact assessment of statutory instruments. - working out a methodology for conducting a preliminary (ex-ante) incomplete impact assessment

- working out a methodology for conducting a complete preliminary (ex-ante) impact assessment of drafts of statutory instruments

CoM, MJ

CoM, branch ministries

Measure 2.4. Building knowledge and skills in the administration regarding the facilitation of impact assessment of drafts of normative acts - developing a training program in accordance with the methodology for conducting impact assessment

Ex‐Post Impact Assessment of the ALARACEAA APENDIX 3 Operative Goals and Measures

Term

Responsibility of

As of 12.200

CoM, MEET, MSAAR and IPAEI

As of 01.2009

CoM, MEET, MSAAR and IPAEI

As of 01.2009

CoM

09.2008

MSAAR

- effective utilization of the Administrative register for control by business over the administration of the regimes

12.2008

MSAAR

- preparing an annual public report on the facilitation of the better regulation policy

Annually, in the month of March

CoM

Measure 2.6. Broadening the scope of data and improving the access to information in the Public Procurement Register Measure 2.7. Developing indicators for evaluating the activity of the control organs.

end of 2008

PPA, CoM, MSAAR

03.2009

Regulatory organs, CoM

Measure 2.8. Evaluating the activities of the control organs.

03.2010

Regulatory organs, CoM

Permanent

All institutions

09.2008

CoM, MEET, MSAAR

As of 09.2008

CoM, MSAAR and IPAEI

03.2009

CoM

Measure 3.3. Consultations with business stakeholder groups regarding their role in the system of impact assessment. Measure 3.4. Prolonging the term for consultations with stakeholders via an amendment to the Law on Statutory Instruments

Permanent 10.2008

MEET, CoM, branch ministries CoM

Measure 3.5. Mandatory publishing of normative acts relating to administrative regulation on the Public Consultations portal at least 30 days prior to their submission to a session of the Council of Ministers

Permanent

Branch ministries

- conducting training of trainers - conducting training of officials from the administration

X X

Measure 2.5. Intensifying control and accountability - introducing the requirement for statutory instrument drafts which introduce administrative regimes and regulate their facilitation shall be submitted to the Council of Ministers after preliminary consulting with stakeholders and the Better Regulation Unit and shall be accompanied by a mandatory ex-ante impact assessment. - creating an Administrative register – provision of actual and accurate information regarding the existing regulatory regimes and administrative services; X

GOAL 3. INTENSIFYING THE DIALOGUE WITH STAKEHOLDERS Measure 3.1. Mandatory, timely and effective consulting with stakeholders. Measure 3.2. Developing and integrating a policy of mandatory and timely consulting on the basis of the minimal consultative standards and practices of the European Union - working out consultation procedures - training the administration in conducting consultations as a part of the impact assessment process - developing a new module and functionality of the Portal for public consultations for recommendations from the business, the non-governmental sector and the citizens regarding regulation improvement

X X

GOAL 4. OPTIMIZING THE REGULATION AT MUNICIPAL LEVEL AND CONSOLIDATING THE CAPACITY AT MUNICIPAL LEVEL FOR IMPLEMENTING GOOD REGULATORY POLICIES Measure 4.1. Overview of administrative regulation and administrative control over commercial activities at municipal level

APPENDICES Operative Goals and Measures - analysis of the regimes implemented at municipal level

- abolition of unlawfully implemented regimes

Term From 06.2008 to X 02.2009

Responsibility of CoM, MSAAR, NAMRB

02.2009

Municipal councils, regional directors

- recommendations for legislative changes aiming to optimize the control over regulation at local level

05.2009

CoM, mayors, municipal councils, regional directors, NAMRB

Measure 4.2. Comparative analysis of regulation practices at municipal level

From 09.2008 to 09.2009

CoM, MSAAR, NAMRB

02.2009

CoM, MSAAR, IPAEI, NAMRB, mayors, municipal councils, regional directors

- spreading of good practices

02-07.2009

- developing a platform for exchange of knowledge and ideas for better regulation

02.2009

CoM, MSAAR, IPAEI, NAMRB, mayors, municipal councils, regional directors CoM, MPAAR, IPAEI, NAMRB, mayors, municipal councils, regional directors

Measure 4.3. Optimizing the activity of local self-government bodies - formulating directions for better regulation at municipal level X

Source: Report on the Implementation of the Better Regulation Program 2008‐2010.

Completed (for permanent activities - in progress) X

Partially completed Uncompleted

Appendix 4: Survey Questionnaire to Stakeholders 1. Name of respondent ……..……………………………………………….………………… 2. Profession and current position of the respondent ……………………….………………... 3. How do you estimate your level of knowledge of the Limiting Administrative Regulation and Administrative Control on Economic Activity Act (LARACEAA) since the debates before its adoption to date? (Please tick the correct answer on each line) Chronology Excellent

Good

Satisfactory

Not acquainted

3.1. Before the adoption of the Act in 2003 – the debates on it 3.2. Final version of the Act adopted by the National Assembly 3.3. Amendments in the period 2003-2008 3.4. Amendments in 2009 4. Do you keep track of public discussions and publications on LARACEAA? (one answer) 4.1. Yes, very actively, and I take part in them ………….………….. 4.2. Yes, with interest ........................................................................ 4.3. Yes, when I find such material ………........................................ 4.4. No ................................................................................................ 5. How often do you deal with issues regulated by LARACEAA? (one answer) 5.1. At least once a week …………........................................... 5.2. At least once a month….………......................................... 5.3. Several times during the year. ............…..…..….….…..… 5.4. Very occasionally ..........................………………….….. 6. What are the major occasions to deal with issues regulated by LARACEAA? ....................................................................................................................................................... ....................................................................................................................................................... .......................................................................................................................................................

APPENDICESÂ

7. How do you assess the level of achievement of the LARACEAA objectives by the beginning of 2010? (Please tick the correct answer on each line) Objectives

Fully achieved

Achieved Achieved to to a high a low extent extent

Achieved is rather contrary to the objective

Do not kno w

7.1. Goal of the Act

Protect free economic initiative

Clearly define the limits of administrative intervention in economic activity at central and local levels

Restricting and reducing publicly unjustified burdening of economic activity

5 6 7 8

Clear defining of the types of regimes regulating economic activity Increasing transparency in the introduction of regulatory regimes Restricting the introduction of new regulatory regimes (licensing and registration) by requiring a motivated opinion on the necessity for such a regulation and advance notification of affected persons Eliminating normative requirements that may reduce competition

Reducing sources of corruption by limiting the discretionary power of administration

Securing publicity of the work of administrative bodies in applying normative acts related to administrative regulation and control on economic activity, as well as the reasons for their changes 7.3. Operational objectives

Standardizing documents on different regimes of administrative regulation and control

Computerizing or creating easy-to-use forms of existing registers

Improving intra-institutional coordination

Improving inter-institutional coordination, including the access to judicial registers and civil status registers

Implementing the principle of â&#x20AC;&#x153;one-stop shopâ&#x20AC;?

Strengthening the subsequent control on businesses through spot checks and documents

8. Rank the three objectives achieved to the greatest extent in early 2010 and comment on the reasons for this success? (use the numbers from question 7) 8.1. First place, objective No. 8.2. Second place, objective No. 8.3. Third place, objective No.

Ex‐Post Impact Assessment of the ALARACEAA APENDIX 4

9. Rank in reverse order the three objectives that were achieved in the least extent, or for which the result is rather contrary to objectives set, by early 2010 and comment on the reasons for this failure? (use the numbers from question 7) 9.1. First place, objective No. 9.2. Second place, objective No. 9.3. Third place, objective No.

10. Rank on a scale from 1 to 5 the extent to which the listed drivers impede the efficient implementation of LARACEAA. 1 - Very high 2 - High 3 - Low 4 – Very low 5 – Do not know (Please answer on each line) Drivers 1

Insufficient number of administrative officials to implement the Act

Low competence of the administration – lack of knowledge of legal requirements

Poor organization of administrative structures, which does not guarantee the timely examining of documents submitted by businesses

Unwillingness to eliminate the opportunities for administration to exercise power over business

Desire of central governors to provide financial resources for the institutions

Desire of local governors to provide financial resources for municipalities

Desire of the administration to preserve opportunities for corruption

Business lacks knowledge of the opportunities provided by the Act Weak capacity of business organizations to impose their views on central and local levels

Estimation

10 Lack of sufficiently powerful business lobbies

Willingness of branch organizations to legally ensure the inflow of funds 11 through the issuance of qualification certificates 12 Wish of licensed or registered businesses to restrict competition 13 Lack of administration that is specifically responsible to enforce the Act

Lack of expertise to implement certain requirements of the Act, such as the obligation to prepare an Impact Assessment before the adoption of new 14 regulations Other (please list in the following lines 15 16

APPENDICESÂ

11. Do you support the suggested proposals? Proposal

1 2 3 4 5 6 7 8

Reducing the number of licensing regimes Reducing the number of registration regimes Limiting the possibilities of local authorities to introduce regimes by their right to local rule-making Expanding the practical application of the principle of â&#x20AC;&#x153;silent consentâ&#x20AC;? Reducing the deadlines for response of the administration Decreasing the frequency of inspections (based on the principle: fewer inspections, higher fines for violations) Imposing higher personal fines on administrators who violate the Act Simplifying the procedure for submitting documents (number and types of documents; e.g., part of the required documents to be replaced by declarations)

Increasing the legal opportunities for self-regulation by business

Structuring and assigning an administrative body to exercise monitoring and control on implementation of the Act.

Increasing the number and scope of information campaigns for the public, businesses and administrators with the goal of raising their knowledge of the Act and related normative acts

12 13

Introducing training programs on LARACEAA implementation for central and local administration Increasing the of budget allocated for consulting services on activities stipulated by the Act (e.g., making IA for any new normative act)

Other proposals (please describe)

Yes, absolutely

Yes, after analysis and assessment

No, the current situation should be maintained

No, rather the opposite

Do not know

Ex‐Post Impact Assessment of the ALARACEAA APENDIX 4

12. Please make your comments on the proposals in the above question.

Proposal 1 2 3 4 5 6 7

8 9

Comment

Reducing the number of licensing regimes Reducing the number of registration regimes Limiting the possibilities of local authorities to introduce regimes by their right to local rule-making Expanding the practical application of the principle of “silent consent” Reducing the deadlines for response of the administration Decreasing the frequency of inspections (based on the principle: fewer inspections, higher fines for violations) Imposing higher personal fines on administrators who violate the Act Simplifying the procedure for submitting documents (number and types of documents; e.g., part of the required documents to be replaced by declarations) Increasing the legal opportunities for self-regulation by business Structuring and assigning an administrative body to exercise monitoring and control on implementation of the Act.

Increasing the number and scope of information campaigns for the public, businesses and administrators with the goal of raising their knowledge of the Act and related normative acts 11 12

13 14

Introducing training programs on LARACEAA implementation for central and local administration Increasing the budget allocated for consulting services on activities stipulated by the Act (e.g., making IA for any new normative act) Other proposals (please describe)

13. Are there specific texts in LARACEAA that you would like to comment and/or should be changed? 13.1. No 13.2. Yes, namely ………………………………………………….……………………

14. Would you like to share something that would contribute to improving the wording or the application of LARACEAA? ………………………………………………….…………………......................................... ..................................................................................................................................................

Appendix 5: Analysis of Stakeholders’ Replies to Survey Questionnaire

Estimate of the achievement of LARACEAA objectives39 For the purpose of analysis, responses have been grouped into a two-dimension scale: 

Objectives achieved to a high extent;



Objectives not achieved or achieved to a low extent.

Based on the analysis of responses to the question “How do you estimate the level of achievement of LARACEAA objectives by the beginning of 2010”, the following conclusions can be made: Objectives achieved to a high extent More than 70 percent of the respondents find that the objective “Clear defining of the types of regimes regulating economic activity” has been achieved to a high extent40. More than one-half of the respondents agreed that the following objectives of the Act have been reached to a high extent: 



Protect free economic initiative;



Clearly define the limits of administrative intervention in economic activity at central and local level;



Restrict the introduction of new regulatory regimes (licensing and registration) by stipulating the requirement for developing evidence of the necessity for such a regulation and prior notification of affected persons.

Not achieved objectives More than 80 percent of respondents consider as not-achieved the following objectives of the Act: 

Increase transparency in the introduction of regulatory regimes;



Reduce sources of corruption by limiting the discretionary power of administration;



Secure publicity of the work of administrative bodies in applying normative acts related to administrative regulation and control on economic activity, as well as of the reasons for their change;



Improve intra-institutional coordination;



Improve inter-institutional coordination, including the access to judicial registers and civil status registers.



More than 70 percent of respondents indicate the following objectives have not been achieved:



Eliminate normative requirements that may reduce competition;

The response rate is estimated at about 40 percent out of 40 Questionnaires that were sent to stakeholders (key experts and interested parties) and processed before January 2010. 40 In this analysis the respondent is able to indicate more than one answer. 56

Ex‐Post Impact Assessment of the ALARACEAA APENDIX 5



Standardize documents on different regimes of administrative regulation and control;



Implement the principle of “one-stop shop”. Ranking of objectives

According to the responses, the three objectives achieved to the highest extent include: 

Clear definition of the types of regimes regulating economic activity;

Clear definition the limits of administrative intervention in economic activity at central and local level; 

Computerizing or creating of easy-to-use forms of existing registers.

The three least achieved objectives: 

Restriction and constant reduction of publicly unjustified burdening of economic activity;



Increase of transparency in the introduction of regulatory regimes;



Securing of publicity of the work of administrative bodies in applying normative acts related to administrative regulation and control on economic activity, as well as of the reasons for their change. Estimation of underlying drivers impeding the efficient LARACEAA implementation

For the purpose of analysis responses have been grouped into a two-dimension scale: 

Very high/High



Low/Very low.

Underlying drivers impeding to a very high/high extent the efficient implementation of LARACEAA are: 

Unwillingness to eliminate the opportunities for administration to exercise power over business;



Desire of local governors to provide financial resources for municipalities;



Wish of licensed or registered businesses to restrict competition;



Lack of administration that is specifically responsible for enforcing the Act.



On the other pole are the reasons that respondents consider as least impeding the implementation of the Act:



Insufficient number of administrative officials to implement the Act;



Lack of sufficiently powerful and organized business lobbies. Support to suggested proposals

The analysis of responses on the measures suggested to increase the efficiency of the Act’s implementation provided grounds for the following conclusions:

APPENDICES

Respondents give unconditional support to the following proposals41: 

Introduction of training programs on LARACEAA implementation for the administration at central and local level (90 percent of responses);



Increasing the number and scope of information campaigns for the public, businesses and administrators, with the goal of raising of their knowledge of the Act and related normative acts (80 percent of responses);



Simplification of the procedure for submitting documents (75 percent of responses).

Proposals which respondents support, but after analysis and assessment, include: Reducing the frequency of inspections, based on the principle: fewer inspections, higher fines for violations (75 percent); Increasing the legal possibilities for self-regulation by business (75 percent); Increasing the budget allocated for consulting services on activities stipulated by the Act, for example, making impact assessments for any new normative act (75 percent). Proposals which get support in principle, with responses distributed equally (50:50) between “unconditional support” and “after analysis and assessment”, include: 

Reducing the number of regulatory regimes;



Limiting the possibilities of local authorities to introduce regimes by their right to local rule-making;



Expanding the practical application of the principle of “silent consent”;



Reducing the deadlines for response of the administration;



Structuring and assigning an administrative body to exercise monitoring and control on implementation of the Act.

In this analysis the respondent is able to indicate more than one answer.

Appendix 6: Review of Regulatory Regimes at the Local Level The goal of the review is to examine, analyze and summarize the practice of applying few examples of regulatory regimes at the local level. The municipalities of Razgrad, Troyan, and Kyustendil are the object of the study. The permit regime for performance of taxi transportation—common for all three municipalities—has been selected for the analysis. The regime for categorization of hotels is selected for the Municipality of Kyustendil, trade certificates regime is chosen for the Municipality of Razgrad, while the regime for obtaining a construction permit is selected for the Municipality of Troyan. Taxi Transportation Permit The regime “Permit of Performance of Taxi Transportation” is a license according to the Law on Automobile Transport. According to Art. 12a, para. 5 of this law, the Minister of Transport issues an ordinance for taxi transportation of passengers (Ordinance № 34 from December 6, 1999). The Law’s function is to regulate the scope and quality of services relating to automobile transport. The taxi transportation of passengers is of particular concern in the towns, and the licensing regime aims, above all, to limit the number of carriers supplying the service and introduce regulations in each municipality to exert control over unlawful taxis. This concern has been pointed out as a reason for the existence of the regime by all municipalities that were examined. On the basis of the Act and Ordinance № 34 of the Ministry of Transport, the Municipal Council (MC) determines the valid term of the permit, which cannot be shorter than 12 months and is universal for all carriers; the council determines the number of taxis allowed to work within the municipal territory, as well as the order and conditions for distribution of taxis among the individual carriers. For example, the decision of MC-Razgrad is for a term of 1 year and a maximum of 250 taxis. The mayor’s functions relate to issuing an ordinance for implementation of this responsibility. Once the permit is prepared by the administration, the mayor signs it. It is by his ordinance that a permit for taxi transportation may be revoked. The documents submission procedure takes place at the center for services provided to the population (the front-office of the municipality). The clients fill out a form entitled “Application” and enclose the required documents in compliance with Ordinance № 34. From the center the documentation is submitted to a chief specialist (chief expert), responsible for transportation (Troyan, Razgrad), who examines the enclosed documents and prepares the permit. The permit is signed by the mayor of the municipality. The entire documentation is then returned to the center where the applicant receives the permit. This administrative procedure is different in the Kyustendil municipality. The difference is evident at the stage of submission of the application for issuing of a permit for taxi transportation: the secretary examines the completeness of the documentation and issues an incoming number. After deciding on the application, another employee checks on the validity of the documents as well as on their compliance with the conditions set forth in Ordinance №34 and prepares the permit. Once the mayor signs the permit, the employee informs the carrier (usually via a telephone number provided for that purpose and occasionally by post) that he/she may come to pick up the permit and sticker (the other two municipalities do not issue a sticker); the official also informs the applicant if a document is missing (or if the documentation submitted is incomplete or inaccurate). The permit and the sticker (and the original receipt for the paid fee) are returned to the carrier by the secretary. In cases of omission in the 59

APPENDICES

documentation submitted, the secretary is obliged to demand a correction, before preparing the permit. In all three municipalities, the servicing is provided at a single desk, i.e. the clients do not need to carry the documents back and forth between departments, and they have no direct contact with the employees responsible for issuing the permit. The applicable procedures and documents can be found on the web-sites of the respective municipalities. The three municipalities, however, have not implemented a practice allowing for the electronic submission of documents and applications. The following standard documents are required for issuing of a taxi permit: 

Standard application form;



List of the vehicles for which the licensed company applies for permits;



Legalized copy of the certificate of good working condition of the vehicles;



Legalized copy of the certificate of suitability of the drivers to perform taxi transportation activities;



Legalized copy of the certificate of psychological soundness of the drivers;



Certificate of the lack or abundance of liabilities to the state;



Certificate of the lack or abundance of liabilities to the municipality;



Receipt for the service fee paid.

Additionally, the Razgrad municipality requires a copy of the license (certificate of registration), while the Kyustendil municipality requires the receipt of taxes paid on the vehicles in the current year. The time required to complete the permit process varies among the municipalities. In Razgrad and Kyustendil the standard term is 14 days, although in Razgrad the carrier can make use of a faster service, whereby the permit is issued in three days. In Troyan the term is 30 days and according to local experts it can be shortened. In 2009, the mayors of these municipalities have issued the following number of permits for taxi transportation: 

164 permits in Razgrad;



67 permits in Troyan;



162 permits in Kyustendil;

This number is relative to the size of the respective towns. The issuing of the permit is taxed via a “service fee” determined by a special ordinance of each MC. In Razgrad, the price is only BGN 4 per vehicle (BGN 6 for the quick service). In Troyan, which is a smaller city, the price is BGN 10, while in Kyustendil it is BGN 40, which also includes the value of the hologram sticker. The evaluation of the councilors, made on the basis of the value of the expenditures relating to the provided service, indicates that the specified price exactly covers the costs in Razgrad; it exceeds the expenditures in the case of Troyan; and amounts to about 70 percent of the related expenditures in Kyustendil. 60

Ex‐Post Impact Assessment of the ALARACEAA APENDIX 6

The analysis of the goals of a permit regime for taxi transportation gives grounds for the following conclusions: 

First, the decisions for the number and location of taxi stopping places, the distribution of the quotas between the different carriers, and the control over unlawful carriers are made at the local level. This provides grounds for this activity to be regulated by the municipalities;



Second, in addition to achieving the goal of controlling the number of businesses providing taxi service, municipalities attempt to achieve other unrelated goals, such as requiring applicants to submit documents certifying that they do not have outstanding liabilities to the local and state governments;



Third, each business is obliged to prove to the municipality that it does not owe any taxes, and the issuing of these documents is time—and resource—consuming. Instead, the municipality could verify itself whether the carrier and its drivers have paid their taxes. The same applies to the verification of liabilities to the state. Practically, the public authority transfers the consequences of its own lack of organization to the clients and its taxpayers;



Fourth, some of the documents are duplicated and their provision is pointless, both from the standpoint of the regulatory goals and of the municipal goals, which are unrelated to the procedure itself. For example, copies (moreover, notary certified copies) of documents certifying the good working conditions of the vehicles and the suitability of the drivers are of no need to the municipality. They are issued by other competent authorities that can exercise control over those matters. This duplicated requirement also costs money and time to the businesses;



Fifth, the local authority does not maintain a public register of the issued permits, nor does it publish a list of all permits issued, the numbers of taxi vehicles, the determined taxi stopping places and other such data that would be of use to the citizens and provide an opportunity for them to exert control over the rule abidance.

Categorization of establishments for catering, entertainment, and hotels The need for the implementation of this regulatory regime is established by the Act on Tourism and the Ordinance on the Categorization of the Means of Shelter and Lodging and the Establishments for Catering and Entertainment (the Ordinance). This is a registration regime that has been specified in the Act. The Act synchronizes the Bulgarian and European legislation and practices with respect to the assignment of a category to the different establishments for shelter and lodging. To receive a given category designation, the establishment (or means of shelter) has to meet certain requirements. The Act on Tourism provides only the minimum requirements for each category. In this way the conditions for the provision of hotel and restaurant services are intended to ensure that the category of, for example, one star is the same in Bulgaria as it is in Italy, for instance. Each municipality has the responsibility to assign catering and entertainment establishments with 1 or 2 stars, and in the case of hotels 1 star or at some places of lodging (single rooms, family hotels, holiday homes, bungalows, camping sites and others) with 1, 2 or 3 stars (the catering establishments in them receive the same category). To meet this requirement, the mayor appoints a Municipal Commission on Categorization, which includes representatives of the municipal administration, of the lodging establishments (or their organizations), and NGOs in the sphere of tourism.

APPENDICES

The commission recommends the assignment of a particular category to the individual sites that have requested assignment of a category if the respective minimum requirements set forth by the Act on Tourism and the Ordinance have been met. In the Kyustendil municipality, servicing is provided at a single counter. The document submission procedure is as follows. The client fills out an application for categorization and submits it along with the documents listed in the Ordinance. The employees verify the completeness and authenticity of the submitted documents and sign a Protocol for documentation completeness (as required by the Ordinance). Subsequently, the client officially submits the Application Form and the enclosed documents to the secretary. The documents required for registration are as follows: 

Certificate of current court registration;



Certificate that the company is not in the process of liquidation;



Reference of the professional and language qualification of the personnel at the site;



Copies of the documents that certify the professional and language qualification of the manager of the tourist site;



A category determination form;



Copy of the ownership document;



Copy of the rent contract;



A document certifying that the site has been brought into operation;



A notary certified letter of attorney if the application is submitted by a representative;



A document certifying the payment of the fee, in compliance with Art. 55, para. 4 of the Act on Tourism.

The secretary then transfers the documents to a member of the Commission on categorization. He/she prepares a draft ordinance to initiate a procedure for categorization of the site. It is signed by the mayor, who also issues a temporary certificate valid for a term of two months. Within the two-month period of the temporary certificate the Commission visits the site, examines whether the minimal requirements set forth in the Act are met and determines its category. It makes a recommendation to the mayor for the issuing of an ordinance for that category. The mayor signs the ordinance, orders the category symbols and, once they are received, hands them to the respective establishment. The applicable procedures and documents are available on the web-site of the municipality but cannot be submitted electronically. This is because, according to Art. 11 of the Ordinance, some members of the expert commission (employees of the municipal administration) must evaluate the submitted documents on their completeness and authenticity. The categorization applications are not accepted unless all documents required under the Ordinance have been enclosed. The acceptance of the documents must be accompanied by a payment of the fee. These requirements hamper the possibility for electronic submission. The deadline for issuing a decision is two months, as established by the Tourism Act. The term is sufficient for the completion of the described activities. Shortening it would burden the municipalities, which deal with a substantial number of establishments and hotels. In 2009, the Kyustendil municipality categorized a total of 53 sites, of which 42 were establishments for catering and entertainment and 11 were hotels. 62

Ex‐Post Impact Assessment of the ALARACEAA APENDIX 6

The service fees are not determined by the MC. They are regulated by the Tourism Act under ‘Tax tariffs collected under the Act on Tourism’. The basis on which the fees have been determined is unclear. Part of the fee is used to cover the cost of producing the category symbols and of remunerating the members of the commission who are not employees of the municipal administration. The income from service fees covers around 40 percent of all expenditures (if the expenses of the municipal administration are taken into consideration). The analysis of the documents and procedures for the categorization of establishments and hotels provides grounds for the following conclusions: 

First, this is a regime that aims to equalize the national evaluation criteria with those applied across Europe. From this standpoint, it is reasonable for it to be regulated by the legislature.



Second, some of the documents, which the municipal administration requires from each business, can be officially obtained by the municipality itself from the Registry Agency, the court and others.



Third, when the categorization expenses are incurred locally, it is not logical for someone else (in this case, the state) to regulate their amount. It is believed that this fee should be regulated by the Act on Local Fees and Taxes and its size should be determined by MCs.



Fourth, it would be useful to publish the evaluations made for the purposes of categorization of the sites on the municipal web-site or on specialized web-pages as a means to publicize local tourism opportunities. Registration of a commercial establishment

The description and analysis of this regulatory regime is based on the examined practices implemented in the Razgrad municipality. This regime is unlawfully implemented under the name “Registration of a commercial establishment” and is normatively settled by Ordinance №4 of the MC on the order and conditions for carrying out trading activity within the Razgrad municipality. The following legislative articles and paragraphs have been specified as grounds for its implementation: Art. 76, para. 3 of APC; Art. 21, para. 2 of the Law on Local Self-Governance and Local Administration (LLSGLA) and Art. 8 of the Law on Statutory Instruments. Art. 21 of LLSGLA determines the legal capacity of the MC, while para. 2 stipulates that: “Whilst exercising its legal capacity in compliance with para. 1, the Municipal Council approves statute-books, ordinances, instructions, decisions, declarations and addresses.” This ground is in direct contradiction of Art. 4, para. 1 of LARACEAA. The municipal ordinance envisages the requirement for registration within an informational database of stationary commercial establishments engaged in trading activity within the Razgrad municipality. Within the Ordinance, it is specified as a registration regime. The trading certificate is issued both at the moment of establishment of a new commercial establishment and in case of changed circumstances, for example, a change of tenant. According to the Ordinance, the goal behind this regime is the creation and maintenance of an informational database covering trading activity within the municipality, as well as a means to exercise control, which has been declared a responsibility of the municipality by a number of other laws. It also allows for the establishment of connections with representatives of this

APPENDICES

business. The information database “Stationary commercial establishments” is developed and maintained by the municipal administration and contains: 

Name and type of the trade site;



Address of the trade site;



Company headquarters, address of main office and telephone number of the tradesman;



Name of the person, representing the tradesman;



The site’s working hours;



Number and date of issuing of the order for prolonged working time.

The control functions of the municipal administration under the Ordinance and the regulations under other statutory instruments relating to trading activity concern: preservation of public order (control over the adherence to working hours); compliance with the Law on Customer Protection (control over prices and others); and the Spatial Law (has the commercial establishment been brought into operation), and so forth. The procedures relating to issuing of trade certificates and the required documents are published on the web-page of the municipality. Templates of the application form can be downloaded from there. However, the documents cannot be submitted electronically. The clients are serviced at a single counter. The documents are submitted to the “front-office” of the municipality. The approved trade certificates are received at the same place. The tradesman has to submit the application form in accordance with the template. Copies of the following documents must be included in the submission: 

A current business statement from the trade register;



A document certifying the identification code by BULSTAT (Unified Identity Code under the Unified Register for Identification of Economic and Other Subjects in the Republic of Bulgaria, called “BULSTAT”);



A document, certifying the property or rights of use of the site;



A document, certifying that the site was brought into operation;



A certificate of registration of the site in the Regional Inspectorate for Public Health Protection and Control – Razgrad, whenever that is necessary;



A notary certified letter of attorney if the application is submitted by a representative;



A document certifying a lack of liabilities to the municipality as of the date of application submission.

The internal procedure relating to the processing of the documents is as follows. The accepted documents are passed from the front-office to the “Trade” unit, where they are examined and processed; the prepared certificate is returned to the submission desk. The term for issuing of the permit is 14 days from the moment of document submission. Once the certificate is signed by the mayor or by an authorized representative, the commercial establishment is included in the information database “Stationary commercial establishments”. The mayor refuses to issue the certificate when some of the required documents have not been submitted. The refusal can be appealed in compliance with the APC.

Ex‐Post Impact Assessment of the ALARACEAA APENDIX 6

The specified term is sufficient for the examination of the documents and preparation of the certificate. In 2009, the Razgrad municipality issued 272 trade certificates. The service is free of charge. The analysis of the practice relating to the issuing of trade certificates gives grounds for the assertion that this regime is unlawfully implemented and should be abolished. Construction Permit The regime is implemented on the grounds of the Spatial Law (SL). It is a permit regime. The goal is the regulation of and control over construction. The procedures and documents required for the issuing of a construction permit are posted on the web-site of the municipality. However, applications and documents cannot be submitted electronically. The servicing for this permit is provided at a single counter. The submission of the documents is carried out in the customer service center of the administration; subsequently, the customer also receives the permit from there. The document processing procedure is as follows. The documentation is submitted to the customer center, where the completeness of the submission is verified and the service fee is charged. From the center, the documentation is passed on to the director of the “Territorial and Urban Development” unit, who distributes it to internal experts for examination and approval. Once all parts of the project are approved, the documents are returned to the director of the “Territorial and Urban Development” unit, who prepares the construction permit and submits it to the chief architect of the municipality for signature. The documentation, together with the permit, is then returned to the customer center, from where the client can pick it up. The term for provision of the service is seven days if the documentation is supplemented by a Report for evaluation of the project’s compliance with existing construction requirements, and 30 days whenever the documentation does not feature such a report. According to a representative of the Troyan municipality the term set by the SL is normal. Shortening it would hamper the quality processing of the documentation. In 2009, the municipality issued 262 construction permits. The clients pay a fee, which is regulated by the “Ordinance on determination and administration of local taxes and fees within the Troyan municipality”. The size of the fees is determined by the MC on the basis of the labor costs for the specialists engaged in providing the service. The fee covers the incurred administrative expenses; its amount is determined by the MC, based on the type of construction site and its size.

Appendix 7: Licensing Regimes and Existing Registers as per LARACEAA Requirements

2. 3.

6. 7.

Regime/Activity

Licensing Organ

Legal Act

Banking activity, electronic money activities, payment institution activities, as well as system operator of payment systems activities.

BNB

Banks – Law on credit institutions Law on payment services and systems

Insurance activity and insurance broker activities Regulated securities market activity, investment mediator, investment or management company as well as a joint-stock company with a special investment goal Additional voluntary and mandatory pension security activites and actuarial activity for servicing of pension security companies Voluntary social security activities for the unemployed and/or professional qualification Health security activities Commodity exchange activities

FSC

Insurance code

FSC

Law on markets of financial instruments Law on public offering of securities Law on special investment companies

yes

FSC

Social security code

yes

FSC

Social security code

yes

FSC State commodity exchange and market-places commission at CoM MF

Health security code Law on commodity exchanges and marketplaces

yes yes

Law on excises and tax warehouses

Not publically accessible.

Customs agent activities Licensed warehouse owner - license for management of a tax warehouse

Duty-free trade

10. Gambling activities 11. Production, transportation, trade and external trading activities relating to weaponry, explosive and military supplies as well as certain supplies and technologies with dual-use 66

“Customs” agency

Availability of a Public Register 1. yes, for banks 2. no, for institutions for electronic money, payment institution activities, and activities of a system operator of payment systems yes

The “Customs” agency maintains a register of the licensed wareshouse owners and of the tax warehouses – it is not publically accessible Not publically accessible

Law on duty-free trade

State gambling commission at MF MEET “Interinstitutional Council” at CoM “Interinstitutional commission” at MEET

Law on gambling

Not accessible

Law on export control over weaponry and supplies and technologies with dual-use

Public register (maintain-ned by the Inter-institutional Council)

Ex‐Post Impact Assessment of the ALARACEAA APENDIX 7 Regime/Activity

Licensing Organ

Legal Act

Availability of a Public Register MI - Uniform automated centralized register – not publically accessible (the law itself prohibits it) Uniform register – not public

12. Private security activities

MI - General Directorate “Security police”

Law on private security activities

13. Activities relating to drafting, manufacturing, import, trade, repair, installation and maintenance of fire precaution equipment, carrying out of activities relating to emergency and fire safety, carrying out of ignitable and explosive activities 14. Manufacturing of compact disks (optical disks) and/or matrixes for them

MI – General Directorate “Fire safety and rescue”

Law on MI

MEET

yes

15. Medical institution activities relating to hospital care, clinics and homes for medical-social care 16. Production, processing, transportation, trade, import, export, transit and storage of narcotic substances for medical and veterinary purposes and precursors 17. Industrial processing of tobacco and production of tobacco products 18. Conducting technical surveillance of hazardous installations, examination of measurement equipment

Law on the administrative regulation of manufacturing and trade of optical disks, matrixes and other carriers, containing information that is subject to copyrights and similar rights Law on medical establishments

MEET

Law on the control over narcotic substances and precursors

CoM via MF

Law on tobacco and tobacco products

yes

State Agency for Metrological and Technological Surveillance (SAMTITCS)

Law on products technical requirements

19. Production of alcohol, distillates and alcoholic beverages

MEET

Law on wine and alcoholic beverages

yes

20. Production and preparation of sowing and planting material for agricultural plants, variety examination activites for agricultural plants, used for sowing and planting material, distribution and trade with seeds and planting material that deviates from the minimal quality requirements

MAF – Executive agency for sort evaluation, approbation and grain control

Law on sowing and planting material

yes

APPENDICES Regime/Activity 21. Public warehouses for grain and grain depository activities 22. Obtaining, processing and storage of sperm and ova, transplantation of embryos in artificial insemination centers and centers for embryo transfers as well as breeding association activities relating to selection and production within the veterinary medicine system 23. Manufacturing and usage of veterinary medical products, retail and wholesale trade of veterinary medicinal products and transportation of animals 24. Commercial Fishery 25. Commercial activities with wastes from ferrous and non-ferrous metals 26. Activities in the energy sphere 27. Activities, related to utilization of nuclear installations, nuclear material and other source of ionizing radiance 28. Exercising of supervision at construction sites

29. Railway transportation of passengers and/or freight and inspection of the technical condition of the carriages and the legal capacity and qualification of the personnel 30. Public transportation of passengers and freight via automobile transportation, including international transportation 31. Conducting inspection of the technical condition of the means of road transportation; repair and technical servicing of those means 32. Universal postal service or of services which fall within the scope of the universal postal service 68

Licensing Organ

Legal Act

Availability of a Public Register yes

MAF – National agency for grain and forage MAF – Executive Agency for selection and reproduction in the stock-breeding sphere

Law on grain storage and trade Law on stock-breeding

yes

MAF – National veterinary service

Law on veterinary activity

yes

MAF – Executive agency for fishery and aquatic cultures MEET

Law on fishery and aquatic cultures Law on waste management

yes

SCEWR

Law on Energy

yes

NRA

Law on safe utilization of nuclear energy

yes

MRDPW – Directorate for National Construction Supervision MTITC – Executive Agency Railway Administration

Spatial Law

yes

Law on railway transport

yes

MTITC – Executive Agency Automobile Administration

Law on road transport

MTITC

Law on road transport

CRC

Law on postal services

yes

Ex‐Post Impact Assessment of the ALARACEAA APENDIX 7 Regime/Activity 33. Postal money transfers 34. Airport operator activities; ground services operator or airline carrier 35. Technical servicing and repair of aviation technology 36. Manufacturing, import and/or distribution of radio transmission devices for civil purposes 37. Radio and television activities 38. Conducting freight transportation along internal water-ways 39. Provision of social services to children 40. Conducting and certifying of vocational training 41. Informing and conducting of vocational orientation

Licensing Organ

Legal Act

CRC MTITC – General Directorate “Aviation Administration” MTITC – General Directorate “Aviation Administration” CRC

Law on postal services Law on aviation

Availability of a Public Register yes no

Law on aviation

CEM

Law on radio and television Trading navigation code

yes

Law on social assistance Law on child protection Law on vocational education and training Law on vocational education and training

yes

MTITC – Executive Agency Maritine Administration MLSP – Agency for social assistance NAVET at CoM NAVET at CoM

Law on communications

yes yes

Source: Authors’ research, as of January 2010.

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