A manual for the identification and removal of administrative barriers to investment
Module 3: Identifying barriers
March 2006
FIAS
Leaders in Investment Climate Solutions
International Finance Corporation and The World Bank Group
Contents
About this manual 1
How this manual is structured 1
Intended audiences for each module 1
Acronyms and abbreviations used in the manual 1
1 Phase 1: identifying administrative barriers to investment 2
Project launch 2
Administrative procedure templates 3
Administrative and regulatory costs survey 4
Refining the templates and surveys, the role of focus groups 4
Administrative procedure templates 4
Administrative and regulatory cost survey (ARCS) 4
Other inputs from business and legal/regulatory analysis 4
Draft administrative barriers report 4
Identifying procedures that need deeper analysis (solution design) 4
2 Phase II: Solution design 4
Analyzing problematic procedures and developing detailed recommendations 4
Finalizing the draft report 4
General instructions 4
General questions 4
36007 v3 Module 3 Identification - March 06 .doc
Appendicies
A Templates cover letter 4
B Standard package 4
C Generic ToR: Enterprise survey 4
D Generic ToR: Enterprise and business intermediary survey 4
E Survey instrument 4
F Instructions 4
G BIS instrument example 4
H Sampling methodology 4
I Report design 4
J Outline of AB report 4
K Specialized expertise ToR 4
36007 v3 Module 3 Identification - March 06 .doc
About this manual
This manual, and the accompanying tools (a business survey questionnaire and a set of templates for government agencies), describe how to assess administrative barriers to investment. Its purpose is to help government agencies, business associations, foreign aid agencies, and consultants interested in carrying out such an assessment.
How this manual is structured
This manual is structured into six separate modules.
Module 1: About the manual: the cycle of reform
Module 2: Prerequisites and preparation
Module 3: Identifying barriers
Module 4: Public-private dialogue
Module 5: Action plans
Module 6: Monitoring, evaluation and continual assessment
Intended audiences for each module
Very few individuals will be willing and able to read the entire manual!
Senior decision-makers in government and foreign aid agencies will probably only want to read Module 1.
Whoever will be responsible for the overall assessment of administrative barriers (team leader and staff of the secretariat) should initially read Module 1 and 2. They can study the remaining modules as the project progresses.
There will probably be an individual or team responsible for the business survey (administrative and regulatory costs survey, usually contracted to a local survey company). In addition to Module 1 and 2, they should especially read Module 3 and Module 6.
There will probably be another individual or team responsible for the templates for government agencies. In addition to Module 1 and 2, they should especially read the relevant sections in Module 3 and Module 5.
Whoever is primarily responsible for the dialog between the public and private sectors, and the preparation of the action plan should focus on Module 2, Module 4 and Module 5.
36007 v3 Module 3 Identification - March 06 .doc About this manual 2
Acronyms and abbreviations used in the manual
AB / Administrative barriersARCS / Administrative and regulatory cost survey
BIS / Business intermediary survey
CMB / Citizenship and migration board
ES / Enterprise survey
GDP / Gross domestic product
FDI / Foreign direct investment
FIAS / Foreign Investment Advisory Service
IPA / Investment promotion agency
LoI / Letter of intent
MI / Ministry of interior
MW / Ministry of welfare
OECD / Organization for Economic Co-operation and Development
S-A / Self assessment
SES / State employment service
SME / Small and medium enterprises
QMS / Quality management systems
ToR / Terms of reference
VAT / Value added tax
Module 3 Identification Acronyms 1
1 Phase 1: identifying administrative barriers to investment
The first stage in an administrative barriers study is the identification of such barriers, which involves several tasks as outlined below. These tasks are performed by the steering committee and its secretariat, in cooperation with FIAS[1].
Project launch
The main assessment instruments include a set of administrative procedure templates designed to gather data from relevant government agencies, and an administrative and regulatory costs survey, to gather comparable data from businesses and/or their intermediaries about their experiences with those agencies. Each of these instruments is described in detail below.
Task 1: Project launch (FIAS, local counterparts/consultants, focus group of businessmen)
A FIAS team should visit the client country to meet with the local counterparts and a focus group of business representatives (roughly 12 – 15 businesses representing a cross-section of the business community) to review and agree on the list of procedures to be covered (based on the list presented in Module 1, Chapter 2, Coverage), the format of the templates and ARCS and BIS surveys to be administered (if any), and to provide any necessary training to carry out the initial investigation of administrative barriers.
The steering committee has to review the templates and the surveys before their implementation. A review by the steering committee serves two purposes. First, it will help to involve and familiarize the heads of the institutions with the exercise that is being carried out and will significantly diminish the chances that any of the institutions will disapprove or disclaim the results of the study, when it is finished. Second, it will ensure that the templates and the survey have been tailored to the specifics of the country and may generate some good and workable proposals to improve the instruments.
Administrative procedure templates
The FIAS tools package provided with this manual includes a set of templates to be used in a range of different agencies, and a basic template that can be adapted for use in additional agencies as necessary. This section of the manual will describe the intended coverage (the range of agencies to be included in the analysis), the content of the templates, and a description of how to refine the templates to fit country-specific circumstances. Instructions for commissioning and administering the templates, and guidelines for analyzing the results are presented in Task 2 below.
The FIAS templates have been designed to gather information from a range of agencies, including the ones listed below (see Figure 1). A full set of templates prepared by FIAS is included in Module 1, Appendix Sample 2.
Figure 1: procedures and templates
General Procedures that are common to all countries in which FIAS Administrative Barriers Studies have been done /Templates Prepared
/Remarks
A. Start-up
1. / Expatriate employment and residency:residence permits / +
work permits / +
Visas / Can be derived from residence permit template
2. / Business registration:
company registration / +
taxpayer registration / Can be derived from company registration template
statistical registration / Can be derived from company registration template
municipal approval/registration / +
foreign investment approval/ registration / Can be derived from municipal approval/registration template
foreign economic activity/customs registration / Can be derived from municipal approval/registration template
registration of issuance of shares
anti-monopoly clearance
3. / Licensing / + / Must be adapted for each separate license
4. / Intellectual Property Registration (Trademarks; Patents)
B. Locating
5. / Identifying/acquiring/leasing land and buildings
lease of land / +
lease of buildings / Can be derived from lease of land template
Privatization of land / +
Privatization of buildings / Can be derived from privatization of land template
6. / Real estate assessment
building assessment (inventorization) / +
land assessment / Can be derived from building assessment template
7. / Real estate title registration / +
8. / Construction approval / +
9. / Utility connections / +
C. Operating
10. / Tax reporting / + / Must be adapted for each type of tax
11. / Value added tax refund / +
12. / Foreign exchange control
13. / Customs procedures / + / Must be adapted for each separate customs procedure
14. / On-site inspections / +
15. / Product/Service certification
Other templates can usually be derived from those that have already been prepared (see below).
Templates should be prepared for every agency that all (or most) businesses need to visit in order to establish a new enterprise, to renew licenses and permits, and those that businesses interact with on a regular basis. For this purpose, it will be necessary to select a sample of five to six sectoral business licenses, and a similar number of inspectorates, as a longer list would be impractical for purposes of a first administrative barriers study (a full set can be completed over a longer period of time).
The templates are designed to provide three types of information for each agency:
1. What the investors need to know:
–Where do I go?
–What do I do?
–What must I bring?
–How long will it take?
–How much will it cost?
2. What both the government and investors may want to know:
–Volume of transactions
–Average processing speed
• Date received
• Date completed
–Number of rejections
–Number of appeals
–Outcome of appeals
3. What the Government needs to know:
–Purpose of each procedure
–How well the procedures are working
–How they can be improved/can they eventually be removed or replaced
Section A of the template provides basic information about each of the institutions involved in the analysis, and how it can be contacted (address, phone number, office hours, etc.).
Section B contains information about the procedures, including:
· the legal basis for the procedures
· other institutions involved in the procedure (e.g. agencies that must make a prior approval or a subsequent approval before the procedure can be considered complete)
· official fees required to complete the procedure
· documentation and information requirements that the investor must provide (e.g. a completed application form, copies of the articles of association of the company, notarized signatures of the officers of the company, etc.)
· processing time (statutory maximum, if any; average processing time, etc.)
· number of applications received
· number accepted and successfully processed
· number rejected or sent back to the applicant
· number of appeals
· outcome of appeals
· flowchart of procedure.
Section C provides an opportunity for the institution to make a self-assessment of the procedures, including:
· the purpose of the procedure (e.g. for company registration, to ensure that basic information about all legal companies is contained in a central location)
· clarity of the procedures
· efficiency of the procedures
· communication between the agency and businesses
· priority areas for improvement (that can be undertaken within the institution)
· priority areas for improvement (required outside the institution, e.g., changes in legislation, or in other agencies involved in the procedures being analyzed).
One of the key advantages of the templates is the standardization of information collection they enable, which ensures a high-quality of data, and also comparability of data across the countries in which they are administered. They should thus form the basis for the description of administrative procedures in all administrative barrier assessment studies.
Unfortunately, FIAS has found, through experience that only a small proportion of templates distributed are actually properly filled in and returned on the first effort. The administrative barriers assessment project team must thus be prepared to build on the information obtained through templates, through other means (i.e. focus groups, interviews, surveys, secondary source data, etc.). However, the templates emanating from those few ministries, departments, and agencies which have taken the trouble to correctly fill them in and return them have another useful purpose. They can serve as a form of positive peer pressure, forcing other ministries, departments, and agencies to take stock of their poor performance.
It is clear that, in some other cases, self-administration of the templates may not be a very useful method to collect information in any form. The templates may then be administered by other government agencies, such as was done by the Thai Board of Investment in Thailand, or by independent consultants, such as was done in Poland. Whether or not they are self-administered, the mere fact that the templates and template administration exercise enjoy the support of government, through the steering committee, makes them a very useful tool for collecting information on administrative procedures.
However they are administered the templates represent an extremely useful tool, affording considerable cost-savings on administrative barrier assessment projects where they have been utilized, given that the alternative is to rely on highly-paid experts and consultants or on highly-demanded FIAS personnel.
Administrative and regulatory costs survey
Depending on the needs of the overall project, FIAS Administrative and Regulatory Costs Survey package (ARCS) can include one of two quantitative instruments, and, of course, both of them:
· Enterprise survey (ES) to record the experiences of a scientific sample of the business community with regards to the main administrative procedures, including in particular the time and cost requirements of businesses to complete the procedures. The survey also offers business respondents the opportunity of ranking the severity of the barriers to investment and business activity, (along with other common obstacles, such as access to finance, crime, corruption, inflation, etc. which puts administrative barriers into context in terms of the priorities of most businesses).
· BIS – survey of business intermediaries (i.e. specialist consulting firms, lawyers, accountants, real estate brokers, customs brokers who help enterprises complete administrative procedures) in order to obtain more detailed information about time and cost constraints, as well as to obtain the information about the most difficult, most resource consuming procedures, or particular steps or agencies within one procedure.
Depending on the budget available for the survey and project specific focus areas, it may also be possible to add various questions to both instruments. Questions to be added may be about businesses’ perception of the quality of service provided by public agencies, the types of problems they have faced, and whether and how those problems were resolved. Business intermediaries can, on the other hand, be a good source of information about informal practices, usage of connections and bribes, as well as privileged status of some market participants. It may also be possible to test various hypotheses about administrative barriers in particular countries, based on focus-group discussions, as described below.