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The Administrative Barriers Study

Objectives and Approaches

Foreign Investment Advisory Service


Wha t i s FIA S?
• The Foreign Investment
Advisory Service
• a joint facility of the
International Finance
Corporation and the
World Bank
• Experience in over 125
countries, over 15 years
FIA S’ M odu s O pe ra ndi
• FIAS’ mandate is to provide advice to
governments that want to attract more
FDI
• FIAS works only at the request of
governments
• FIAS reports are confidential for the
client
• FIAS co-finances about half the cost of
its work in most client countries
Ad mi nistra ti ve
Ba rr ier s to I nvestm ent S tu dy
• What they are
• Why they are useful
• How they are conducted
• Where they have been conducted
• What are the outcomes
Wh ile Ma ny N at ion s H ave
Imp le men ted M ac ro
Ref orm s…
• e.g., liberal investment legislation
• “national treatment”
• liberalizing the foreign exchange
market
• creating a more stable macroeconomic
environment
… Seco nd- tier P ol icy a nd
Regula tor y C onstra ints R ema in
• Investors must spend substantial
amount of time, money and energy to
obtain the required permits, licenses,
authorizations, etc.;
• Each of the required approvals
involves multiple agencies, forms,
steps, etc.;
• The process lacks transparency, and
often depends on who knows whom;
• Government authorities and agencies
face problems of overlapping, even
Ad mi nistra ti ve Barri ers

•N •Acquire Business Visa


•Get Tax ID ego
tia • Register i v e s • with Investment
te e n t Ex
•Get Import Permitwi IncPromotion pAgency or
l a i mt h tG
•C U•nApply for Incentives oo
•Get Employer ID ion ds
•Re • s
newExpatriate
•Apply for Apply for Investor Permit
Inve i t s
Work Permits orrP s t f•
o Find Land
e P erm
•Apply for License i a t its
at r • Apply for Land
ep
• R i c e n s es
•Register L
•Renew Business
Senegal: Le Parcours de l ’Investisseur
Ministère de l’ Ministère de l’
Industrie Environnement
Inspection Statistiques
Sonatel Senelec ONAS/SDE Direction BREP/ SGS Douanes du Travail du Travail
Commerce Douanes
Ar
Bureau des rêt Extérieur
éd IPRES
’au

exonération
Etablissements

Dédouanement
de vérification
Demande
tor

Titre d ’

Attestation

Dossier de
Demande
Dos

Demande

Importateur-
Exportateur
Classés sier isa
tio Déclaration du

Carte
n CSS
mouvement du
travailleur
Présidence

Travaux Publics Agrément au Code des Investissements, Guichet


Entreprise Franche Unique

Services Avis
d ’Hygiène Technique

Protection Civile
L ’Investisseur Elaboration des Notaire
Statuts de Société (Privé)
Domaines
• prépare 23 dossiers différent ;
Service • passe par 31 services de l ’administration Enregistrement des Centre des
Dossier/Permis de
Régional de
Construction
(dont 6 plusieurs fois) ; Statuts de Société Impôts
l’Urbanisme
• passe neuf a vingt-quatre mois pour finaliser
Déclaration de
ces procédures. Conformité
Commission de
Cadastre Contrôle Enregistrement des Statuts Tribunal du
Commerce
Registre du Commerce
Direction des
Domaines Demande de terrain
Prévision et
NINEA Statistique
Direction de
l’Industrie Attestation Industriel

Numéro Compte Contribuable Centre


Institution de des Impôts
Prévoyance Adhésion NITI
Maladie
Investissement
Enregistrement

Déclaration

d ’Ouverture
d ’Identité

Affiliation

Affiliation

Déclaration
Intellectuel

Etranger
Propriété

Carte

Organisation Ministère de Ministère de IPRES Caisse de Inspection Centre des


Africaine de la Direction de l ’Economie, l ’Intérieur Sécurité Régionale du Formalités des
Propriété l’Industrie Finance, Plan Sociale Travail Entreprises
Intellectuel
Often , In ap pr opr ia te
Structu res A re a t th e Roo t
of the P ro bl ems
• Economic philosophies have changed, but
bureaucracy hasn’t
• Governments take control-oriented approaches
• Private sector is considered “guilty until proven
innocent”
• Bureaucracies designed to prevent abuse - not to be
efficient
• Opportunities for corruption
Objectiv es : Simpl ify an d
Stream line I nvestm ent
Pro cedu res
• Identify major administrative barriers
• Set an agenda and timetable for the removal
of barriers
• Introduce an international perspective
• Propose an approach to internalize the reform
process
WH Y A DMI NI STR ATIVE
BAR RI ER S?
• Reform, adjustment and liberalization in
place or underway
• Lack of private investment response
• Investment climate still problematic
• Need for vehicle to examine investment
climate in a comprehensive fashion
• Not a fundamental determinant of
investment, but still a negative factor
SYM PTO MS of
ADMI NI STRA TIVE BAR RIER S
– Rigid and pervasive barriers between
formal and informal sectors
– Lack of 100 percent foreign investment
– Low realization rates for projects
– Emphasis on screening and restriction of
entry as regulatory tools, rather than
monitoring and enforcement
– Corruption
– Poor government-private sector relations
EF FE CTS on INVE STME NT
CL IMATE
– Increased business costs
• Delays
• Managerial time
• Bribes
– Uncertainty
• Scares off prospective investors; distorts
project structures
• Complexity means any business is always in
violation of some law or regulation
• Businesses exposed to capricious enforcement
EFFE CTS on TY PES of
INVE STO RS
– Foreign Investors
• Loss of the “good” foreign investors so actively
promoted
• Attraction of those who can “work the system”
– Informal Sector
• Raised hurdles for compliance
• These costs are as important as taxes
– Domestic Formal Private Sector
• Bears brunt of regulations and taxes
We Divi de the Mo del into F our
Se cti on s o ve r Two Phases.

Employing Functioning Locating/


Site Development
Startup

Investor

Reporting Operating
The C ore Pr ocess es a re
Gr ou ped i nto Fo ur Gen eral
Ca te gori es.
• Employing, including investor visas/
expatriate work permits, application
for incentives, etc.

• Site Development, including land


allocation, title deed transfer,
rezoning, building permits, utility
provision, and environmental
clearance.
The C ore P ro cess es a re
Gr ou ped i nto Fo ur Gen era l
Ca te gori es
• Reporting, including company
registration, tax registration, Central
Bank registration, investor visas/
expatriate work permits, application
for incentives, etc.

• Operating procedures, tax payment,


import/export procedures, site
inspection, labor hiring and firing
We S egre gate the F our Gr oups
Into 13 Pr oce sse s
Find Land
Hire Local Labour
Transfer Ownership
Expatriate Work
Permit Develop Site

Investor Visa Environment


Investor

Register Import

Pay Taxes Export

Acquire Incentives Repatriate Profits


Each Pr oce ss Is A na lyz ed o n
Fo ur Dimen si on s

• What purpose(s) is the approval


intended to serve?
• How easy is it to go through the
approval?
• How long does it take to process?
• How much does it cost?
METHO DOLOGY an d SCO PE
– Documentation of all procedures, licenses,
requirements
• Steps
• Institutions
• Delays
• Costs
– Assessment and recommendations
– Workshop and dissemination
– Implementation
METHO DOLOGY an d SCO PE
• Perspective of firm/investor
– Regulations, and how they are implemented
• Organization follows investment process
– General approvals
– Sectoral licensing
– Land, site development and utilities
– Operational requirements
• FIAS experience to date
– Ghana, Namibia, Mozambique, Uganda, Swaziland,
Lesotho, Mali, Madagascar, Senegal, Mauritania,
Zimbabwe, Jordan, Latvia, Lithuania, Bolivia, Bulgaria,
Slovenia, Croatia
GE NER AL A PPR OVAL S
– Complex investment codes, incentive
schemes, and approval requirements
– Company registration formalities and
delays
– Tax registration
– Immigration permits
– Business licenses
– Other registrations
ACCESS to L AND a nd SI TE
DEVEL OPM ENT
– Greatest source of delays and frustration
– Access to land
• Delays in identifying and securing government land
• Delays in title transfer
• Lack of capacity
• Decentralization
– Site development
• Duplicative review and permitting
• Lack of published standards
• Circumvention, especially at local levels
UT IL ITIES
– Delays in service extension
• Lack of capacity
• Priority to government
– Companies pay full costs of extension
• No compensation
– High costs
– Poor service provision
• Cutoffs and brownouts
– Limited alternatives available
• Lack of serviced land or industrial estates
– Privatization is bringing results
OPE RATIO NA L REQUIR EMENTS
– Foreign exchange controls
• Hangovers despite liberalization
• Most current account transactions freed
– Labor, health and safety regulations
• Duplicative reporting requirements
• Duplication of workplace safety oversight
• Liberalization has ended most direct controls
– Import-export procedures
• Customs and Port administrations
• Corruption and arbitrary enforcement
• Import licensing maintained
TYPE S o f CON STR AIN TS ENCOU NTE RE D
– Poor policy formulation
• Investment codes and sectoral licensing
– Policies reformed, procedures remain
• Trade licenses
– Poor procedures
• Construction permits and approvals
– Ineffective bureaucracies
• Lack of capacity
• Undermined by corruption
• Lack of coordination
– Systemic issues
• Land
• Public utilities
IM PL EM ENTA TIO N
– Mode has varied widely across countries
– Requires high level political support
– Direct participation of line agencies
– Task force with regular monitoring and
defined time frame
– Pilot projects
– Competition among agencies
– External financial and technical support
• Difficult to structure policy conditionality
Ob vi ous Be nefits Co me
From th e R edu cti on of Red
Tape
• The elimination of unnecessary steps
and procedures
• The simplification of remaining
approvals (forms, documentation, etc.)
• The availability of information,
facilitation, and other assistance for
investors.
• Increased efficiency, effectiveness, and
accountability of government executing
agencies.
Draft R eport

• Description of each of the processes


• Analysis
– Investors’ experiences
– Cross-country comparisons
• Recommendations
Rou nd-Ta ble Work shop t o
pre sen t t he D ra ft R ep or t

• Participation by relevant Government


agencies
• Representatives of the private sector
• Donor involvement
Round -Tabl e Dis cu ss ions

• An Investment Round-Table: What is it?


✹ A body made up of high-level representatives from both the
public and private sectors
• What would it do? It would:
✹ identify the most important issues affecting business
activity;
✹ work through recommended changes to laws and rules;
✹ present the recommendations to the policy-makers who
have the authority to act
Fo rmi ng an
Adv iso ry Gro up
• Use broad pub lic sector/ pri vate se ctor forum (e.g.,
Chamber of Commerce) to form Advisory Group;
• Use Advisory Group to decide which are mos t imp ortant
issues and who needs to be represented - form W ork ing
Grou ps;
• Use smal ler pri vate org ani zation s (e.g., Trade
Associations, etc..) to vote on representatives to working
groups;
• Use working groups to find sou rce s o f inf ormation and
referees (e.g., courts, academia, consultants);
• Use working groups to come u p wi th spec ific
recommend ation s for review by larger Advisory Group; and
• Use Advisory Group to present reco mmend ation s to pol icy
mak ers (Cabinet or Parliament)
Imp le men tation a nd
Follo w-Up
• Requires:
– high-level Government commitment
– active private sector involvement
– outside support
• Can yield:
– more efficient Government agencies
– reduced corruption
– better relations between public&private
sectors
Wh ere FI AS h as don e s uch
studies
• Latvia, Lithuania, Bulgaria, Romania,
Slovenia
• Bolivia
• Jordan, Egypt
• Ghana, Uganda, Mozambique, Namibia,
etc.
• Brazil, Turkey, etc.
RE SUL TS
• Institutional approaches
– Ghana Gateway Secretariat pushed reduction of import
clearance time from 2 weeks to 3 days
• Streamlining
– Tanzania reduction of delays in immigration permits
from 6 months to 2 weeks
• Capacity Building
– Resources to registrars in Namibia and Uganda
• Policy Reform
– Galvanized support for reform in Senegal
– Significant regulatory changes in Jordan
• Customer service approaches
– Windhoek investor’s window