1 Benefits and Challenges of the Regulatory Reforms in Georgia Zaal Lomtadze, Deputy Minister of Environment 11 October 2007, Belgrade

2 Reform and Development Program of the Government for Among the government’s reform priorities:  Improving the business environment  Cutting state intervention to a minimum (deregulation)  Establishment of “compact, competent and properly motivated public service”  Cutting bureaucracy in both numbers and influence  Promotion of public input in decision making  Enforcement of high standards for the protection and sustainable use of natural resources Georgia has achieved significant progress in cutting red tape and increasing economic freedom.

3 MEPNR Medium-term Priorities  Institutional reform (2005–2007)  procedural development  budget increase  obligatory medium-term expenditure framework planning  staff training  better targeted technical assistance programs of donors & IFIs  Reform of instruments of natural resources use (2005–2008)  Reform of instruments of environmental protection (2005–2010)

4 Situation before the Reform ( )  Low authority of the environment ministry within the government  Shortage of resources: budget for little more than salaries  Weak environmental planning and implementation  High turnover of professionals: private sector demand, low wages, low motivation  Management and decision-making processes isolated from other stakeholders  Inefficient monitoring systems  Weak law enforcement  Performance measured by output indicators only: number of new legislative acts adopted, of inspections carried out

5 MEPNR Staff Optimization

Established based on the Law “On State Control of Environment Protection” Main responsibilities:  Identification of the regulated community  Compliance monitoring  Registration, enforcement, and analysis of violations of environmental and natural resource regulations  Preparation of proposals for mechanisms to encourage compliance Creation of Environmental Inspectorate

7 Is There a Deterrent Against Violations? Deterrence condition – complete removal of illegal benefit; true if: D × P × F > B D – probability of detection of a violation P – probability of prosecution of a detected violation F – the amount of fine imposed (and actually paid) B – benefit from an illegal activity In Georgia: D increased sharply, but only in the natural resource sector P also improved radically F – some progress, not across the board

8 Reform Progress as of 2007  The MEPNR authority has increased, mainly due to the importance attached to natural resources management (government priority)  Much better budget funding: salaries are competitive with the private sector  Mixed progress in reforming the legislation: as enforcement improves, some serious gaps emerge  Stakeholder cooperation has improved but the priorities are dictated by the government’s economic agenda  The use of integrated approaches in permitting and inspection has widened and procedures of inspection were updated and better documented  Increased transparency and reduced corruption  No clear progress in performance measurement

9 New Risks to Regulatory Reforms  Better, but selective application of rules due to pressure to support economic growth  No place for environment protection in the government’s short-term agenda and no long-term vision  Lowering “barriers to investment” may go too far, resulting in a kind of anti-environmental protectionism?

10 Key Lessons Learned  It helps when environmental regulatory reforms are part of a bigger package providing institutional and financial support.  It is impractical to attack all problems at once: priority planning is necessary.  There have to be smart ways to minimize damage from interest groups’ lobbying.  A long-term commitment to reform is necessary but is hard to institutionalize in a convincing way (MDGs? PRSPs? SD strategies?)  Although international support can be instrumental in recognizing the need for reforms and partially supporting them…  Reforms have a chance ONLY when domestically driven.