Removal of Administrative Barriers in Russia: Key Issues and Experiences in the NW

RegionJacqueline Coolidge

World Bank

Creating A Conducive Legal & Regulatory Framework for Small and Medium Enterprise Development in

RussiaA Policy Dialogue Workshop, St. Petersburg, Russia

September 14-16, 2003

2

FIAS in Russia

• 2000: V. Novgorod, St. Petersburg, Leningrad, Sverdlovsk, Tomsk

• 2002: Follow-up, plus Perm, Kaliningrad, Nizhny Novgorod and Magadan

• 2003: Follow-up, plus Rostov, Irkutsk, and Sakhalin

3

Administrative Barriers to Investment

• Phase I: Administrative Barriers Report, including description, analysis, and recommendations (FIAS team+ Govt.)

• Phase II: Dialog/Prioritization/Action Plan (Government and business community)

• Phase III: Implementation (Government)• Phase IV: Monitoring and Evaluation

(Government + business community)

4

Phase 1: Data from Agencies

• Hard data from each of the agencies– Official fees

– Volume of transactions

– Average processing speed• Date received

• Date completed

– Number of rejects

– Number of appeals

– Outcome of appeals

5

Business Surveys

• Baseline survey and follow-up– How long do procedures take?– How much do they cost?– Is everyone treated the same?– Any special problems?

• League table of agencies

• League table of regions/localities

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-45 -30 -15 0 15 30 45

Novgorod Oblast'

St. Petersburg

Leningrad Oblast'

Sverdlovsk Oblast'

Tomsk Oblast'

Aver. of 5 regions

Very helpful Mildly helpful Very unhelpful Mildly unhelpful

-45 -30 -15 0 15 30 45

Perception of Federal and Local Governments as an obstacle/supporter for doing business in 2000 (percent of respondents)

Federal Oblast/Subject

8

25.8

15.322.1

38.9

23.7 15.516.9

41.7

22.820.619.4

37.2

01020

3040506070

8090

100

<10 employees 11-20employees

21-50employees

>50 employees

Tomsk Kalinigrad Perm

SizeSize Group Distribution,

500 Firms Per Region

9

0

0,1

0,2

0,3

0,4

0,5Stock-market regul.

Foreign exchangeLabor

IPR

Antimonopoly

Registering

Police

Sanitary

Reorganization

Anti-competitive practicesEnvironment

Fire/safety regul.Debt restructuringCustoms

Judiciary system

Certification

Infrastructure

Licensing

Corruption

Taxes

Construction permitsLand

% of the surveyed firms % of firms which gave answers

Barriers in 3 Russian Regions

10

Land Market Near-Monopolistic

• Many allegations of favoritism

– Cronies get favorable access/terms

– Below-market rent on primary leases

– Profitable to sub-lease at higher market rates

• Allegations of abusive lease agreements

– Municipality can raise rent any time to any rate

– Highest rates of reported bribery

– Lowest rates of quality of service

11

Statement: Land Market in Russia is almost monopolistic and controlled by “friends” of local authorities

.

Renting Land Plots in Three Regions of Russia (distribution, %)

1

4

35

8

1

3

29

7

2

2

3

33

6

3

0 5 10 15 20 25 30 35 40

From the Federalbodies

From the Regionalbodies

From the Localbodies

From Juridicalpersons

From physiscalpersons

Kaliningrad Oblast' Perm Oblast' Tomsk Oblast'Note: Not rebased

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Statement: Land Market in Russia is almost monopolistic and controlled by “friends” of local authorities

Note: Data have been rebased, to exclude from the total those respondents who responded either DK or NA.

14

20

18

24

19

10

30

19

20

18

25

14

11

28

14

12

11

16

6

7

16

0 5 10 15 20 25 30 35

Excess ive paperwork

Artificial complications

Information about theprocedures is not avail able

Bureaucratic voluntarismof some officials

Requirement to give bribes

Lack of competence ofoffici als

Need to rely on personal /private connections

Kaliningrad Tomsk Perm

Respondents who thought that following problems in dealings withland/premises permit issuing authorities are a usual practice (%)

14

20

18

24

19

10

30

19

20

18

25

14

11

28

14

12

11

16

6

7

16

0 5 10 15 20 25 30 35

Excess ive paperwork

Artificial complications

Information about theprocedures is not avail able

Bureaucratic voluntarismof some officials

Requirement to give bribes

Lack of competence ofoffici als

Need to rely on personal /private connections

Kaliningrad Tomsk Perm

Respondents who thought that following problems in dealings withland/premises permit issuing authorities are a usual practice (%)

13

Prepare Draft Report

• Description of each of the procedures

• Analysis– Investors’ experiences– Cross-region and international comparisons– Strengths and weaknesses

• Recommendations for improvement

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Need Private Secondary Market of Land

• Competition in real estate market

• Transparency regarding real estate sales

• Transparency regarding procedures, fees and processing time

• Create level playing field

• Remove discretion

15

Recommendations - Land

• Allow municipalities to retain most land tax revenues

• Eliminate land rent concessions for firms• Accelerate implementation of land-use zoning

as per RF Land Code• Eliminate architectural

authorities from land privatization

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Recommendations - Construction

• Eliminate state monopoly on technical passports

• Encourage coordination between agencies and development of “single window”

• Establish standards and formulas for connection fees and charges

• Establish time limitations for technical conditions

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Phase II: Dialog between Government and Business

• Participation by relevant Government agencies

• Representatives of the private sector

• Donor involvement

• Facilitators

18

Workshop to Discuss Draft Report

• Discuss findings and recommendations of report;

• Prioritize among recommendations;

• Discuss how recommendations can be implemented

• Prepare Action Plan to present to Policy Makers and donors

19

Action Plan

• What are the objectives?

• What is to be done?

• Who will do it?

• When will it be completed?

• How will we measure impact?

20

Phase III: Implementation

• Amendments to laws

• Changes in regulations/ procedures

• Performance indicators for agencies

• Training/technical assistance

21

Phase IV: Monitoring and Evaluation

• Once reforms have been agreed, there is a need to monitor implementation– Checklist of reforms– Data from agencies– Business surveys

• Evaluate Impact

• Revise reform agenda

22

Cycle of Reform

1. Identification of

problems

2. Government/

business dialogue

3.Implementation

by decision-makers

4. Monitoring and

evaluation to assess impact

23

Foreign Investment Advisory Service, joint facility of International Finance Corporation and World Bank

Jacqueline Coolidge

Program Manager, Europe, FIAS

Tel.: + (1-202) 473-3791

Fax: + (1-202) 522-3262

E-mail: jcoolidge@ifc.org

www.fias.net

www.worldbank.org.ru

Creating A Conducive Legal & Regulatory Framework for Small and Medium Enterprise Development in Russia

A Policy Dialogue Workshop, St. Petersburg, RussiaSeptember 14-16, 2003