The Significance of Inspection Reforms for the Improvement of

the Business Environment in Serbia

Slavica Penev Andreja Marušić27.09.2011.

The nature of inspections

• Inspections are a key enforcement mechanism within regulatory reform

• Purpose of inspections is to ensure compliance with regulations and governmental requirements

• They are important for enforcing regulations to protect public health, safety, and the environment and to carry out economic functions

Inspections and competitiveness

• In a broader perspective effective inspections are important for an overall improvement of competitiveness

• Many inspections are creating heavy burden• Increase of the competitiveness of the private

sector can be achieved by decreasing the administrative burdens businesses face

Minimum criteria of a well designed inspection system

• Clear compliance rules and a clear mandate for the inspections;

• Reduction of regulatory risks for businesses;• Instruments for fighting corruption;• The system does not create unnecessary burdens

and costs to businesses• Transparency – businesses can access all relevant

information about inspections easily• Cost-effectiveness - limited enforcement budget is

maximized through risk based controls

Promoting compliance – spectrum of measures

Models of inspections reforms

Institutional Framework

Legislative Framework IT solutions

Reforming individual inspections – ad hoc approach

Ad hoc reforms of laws and regulations related to specific inspections

Ad hoc IT solutions for particular inspections

creating a coordinating body

Common legal framework

IT communication between inspections

Creating a centralized inspectorate

Common legal framework + strategic approach in reforming particular laws

Joint software for all inspections

Examples of comprehensive inspections reforms implemented

Start date

Single law

Inst’l reform

Policy area Main approach New inst. ICT

Bosnia & Herzeg.(Rep.Srp)

2006-2007

Yes Yes All inspections except tax

Centralized/unified

inspectorate

General Inspectorate

Yes

Croatia 1999-2008

Yes Yes Most of inspections

Centralized/unified

inspectorate

General Inspectorate

Yes

Latvia 1999 Yes Yes Most of inspections

Coordination Inspectorate Coordination

Council

Yes

Poland 2000-2009

Yes Yes Selected inspections

Coordination General Trade Inspectorate

Yes

Slovenia 2002 Yes Yes Most inspections

Coordination Inspection Council

-

Inspection Reforms - where is Serbia so far?

• Regulatory Reform in Serbia was one of the transition priorities during the previous decade

• The only area in regulatory reform which was neglected was the area of inspections

• The last comprehensive diagnostic study related to inspections in Serbia was in 2003 – World Bank Admin. Barriers Study

Inspection Reforms - where is Serbia so far?

• Inspections in Serbia are numerous and decentralized - 31 different inspections within the competence of 10 different ministries

• Inspections reforms are ad hoc implemented as individual reforms of specific inspections

• There is no framework inspections law• There is no coordination body guiding inspection

reforms• There is no formal communication and coordination

between inspections

Institutional Framework - where is Serbia so far?Reforming individual inspections – ad hoc approach

In progressComprehensive reform underway in the area of Environmental Protection, driven by the EU agenda

Creating a coordinating body

In progressThe Government adopted the recommendation for the establishment of an inter-ministerial coordination body for the reform of inspections

Creating a centralized inspectorate

Under consideration/discussionCoordinating body should analyze the possibility of merger or centralization of inspections

Legislative Framework - where is Serbia so far?Ad hoc reforms of laws and regulations related to specific inspections

In progress-Package of “green laws” adopted in 2009-Draft Market Surveillance Law

Common legal framework In progressThe Ministry of Public Administration and Local Self Government established a working group for drafting a framework inspections law

Common legal framework + strategic approach in reforming particular laws

None

- app. 1000 laws and regulations identified in legal databases which contain the word inspector or inspection in the title or content- app. 90 laws and regulations identified by regulatory authorities in the guillotine process as regulations which contain inspection procedures

IT solutions- where is Serbia so far?

Ad hoc IT solutions for particular inspections

Limitedadequate software solutions for inspections is precondition for transparency and accountability

IT communication between inspections

Need is recognized but not yet established

Joint software for all inspections

NoneHowever, a joint software or interphases connecting inspections software would enable the cooperation of inspections and the elimination of overlapping of inspections

Example of EU Driven Reform of Inspection - Environmental Inspection

• Reform initiated in parallel with the EU accession process of Serbia (early 2000’s)

• Cover one of the priority EU harmonization areas• Significant and intensive cooperation with the

international community (EU, OEBS, EAR, SIDA, BERCEN, IMPEL)

• Intensive legislative activities – adoption of “green package” of laws (17) and related by-laws (207)

• Procedures governed by check lists based on the EU regulations

• Continuous training and building capacities activities supported by international community

Improvement of Accountability in the work of Market Inspection - Internally driven reform

• Software for the improvement of the statistics of work of market inspectors enables the heads of departments to monitor inspectors

• Internal procedures for specific inspection controls have been defined

• Professional exam for market inspectors in addition to the State Exam

• Call center for complaints against inspectors

Public availability of information on inspections

• Annual reports of environmental, urban planning, construction and market inspection are comprehensive and available on-line;

• Legislation related to the inspection area are available on-line;

• Procedures and check lists are used internally and are not available on-line

• the on-line availability of clear and comprehensive procedures and check lists would facilitate compliance of inspected subjects

Jointly recognized areas for improvement in the work of inspections

• Framework inspections law• Need for data sharing and coordination among

inspection• Coordination body for inspections to initiate

and implement joint reform efforts• More intensive external support in capacity

building and EU harmonization process

Areas of opposition to the reform of inspections

• Reluctance to consider the idea of merging inspections and reducing their number (31 inspections within 10 ministries)

• Opposition among inspectors to introducing new procedures which ensure accountability

• Resistance to reforms limiting certain authorities and powers of inspectors

• Unwillingness to operate transparently and share information with businesses

How businesses perceive inspections

• Frequent legislative changes: “not even experienced accountants can manage the forest of regulations “

• Regulations are unclear and require interpretations. Interpretations issued by ministries are not mandatory, they are often inconsistent and conflicting.

• In performing inspection controls, inspectors often invoke regulations or internal rules which have not been published

• As a rule, inspection controls are unannounced• Inspections are uncoordinated and lenghty and often differnet

inspections request from businesses the same data and documents• The informal economy is practically not controlled, while only the

legal businesses which have the capacity to pay penalties are controlled – i.e. Potentially the most vital part of the conomy suffers

• The focus of inspections is on penalizing businesses and not supervision and prevention

Conclusions?

That’s our job today!

we are looking forward to your discussion