Building Regulatory Structures to Drive Effective and Efficient Enforcement: Models and Experiences of Coordination, Consolidation and Mergers Giedrius Kadziauskas, Consultant, Inspection Reform and Better Regulation

Lithuania in short ♦ Lithuania was occupied by Soviet Union in 1940 and restored independence in March, ♦ Since 2004 member of NATO and European Union. ♦ Population less that 3 million. ♦ Balanced climate – 2 weeks - 30C in winter and 2 weeks +30C in summer. ♦ Highest mountain Aukštojas 293,84 m above sea level.

Results of the consolidation of institutions in – minus 10 The number of business supervisory institutions was reduced: 16 institutions were merged into 6. There are 60 remaining business supervisory institutions. But nobody was happy

Nobody was happy ♦ The “weakest” inspectorates fell ♦ There was little benefit for the general public since small institutions had been merged (they had little burden before the consolidation) ♦ The number has been reduced – easier to implement reform, small budgetary savings, political gain for reducing number of institutions.

The slogan for the reform: “From punishment to advice”

Committee of Experts The 9 largest inspectorates, along with the Reform Team, created a panel for sharing experience and forming examples of best practices Fire and Rescue Department (PAGD) Fire and Rescue Department (PAGD) State Labor Inspectorate (VDI) State Labor Inspectorate (VDI) State Non-food Product Inspectorate (VNMPI) State Non-food Product Inspectorate (VNMPI) State Food and Veterinary Service (VMVT) State Food and Veterinary Service (VMVT) State Tax Inspectorate (VMI) State Tax Inspectorate (VMI) Road Transport Inspectorate (VKTI) Road Transport Inspectorate (VKTI) State Public Health Service (VKTI) State Public Health Service (VKTI) State Territorial Planning and Construction Inspectorate (VTPSI) State Territorial Planning and Construction Inspectorate (VTPSI) Environmental Protection Agency and Regional Environmental Protection Departments under the Ministry of Environment (AAA)

System may not be mature for mergers - homework ♦ Inspectorates generally behave in competitive not cooperative mood. ♦ Inspectorates treat their own subject as super specific and dismiss similarities in challenges they face. ♦ Politicians and ministries in charge do not have capacities to effectively supervise inspectorates (lack of indicators, lack of specific competences, no designated people) ♦ Inspectorates operate in fragmented legal environment – sectorial laws, different operational enforcement rules

Why consolidation of functions and institutions is important: ♦ Achieve economy of scale in implementing the inspection reform ♦ Reduce burden on business by better coordination and of inspection efforts and business-inspection encounters ♦ Apply uniform procedures across different inspection fields ♦ Apply the overarching risk assessment (not only within one supervisory institution, but rather within the sector, system) ♦ Reduce budgetary burden.

Strategic committee of the Government Working group (1 field) WG (2 field)…WG (11 field) Supervisory committee Government Project management group (Coordinator)  Working group for every field of consolidation Implementation supervision and management structure  Working groups – prepare consolidation solutions for each field, implementation plan  Strategic committee -decides on the most important issues – directions, management structure,  Supervisory committee (some reps from ministries, government administration, key supporters) – content management, consolidation plan preparation.  Project management group – managing working groups, communication etc Decision making level Managing level Implemen tation level

Risks associated with process consolidation/mergers: ♦ Inertia of large institutions – inspectors, managers are accustomed to the existing range of inspection fields and areas of influence. ♦ Consolidation without the improvement of daily practice would not bring desired results of easing burden for the businesses, but might undermine the trustworthiness of the endeavor ♦ Consolidation consumes huge amount of efforts from the reformers, absorbs significant amount of political backing. ♦ The level to make decision to get rid of inspections might be related to the question of deregulating certain field. And the mandate to deregulate rests within the parliament.

Consolidation models ♦ Merging kin functions around (building safety and safety of lifting/construction equipment and pressure vessels, protection of competition and consumer protection board) ♦ Merging functions along the production chain (from stable to the table chain) ♦ Merging functions in the territorial proximity (the Netherlands - example of mergers of different inspections in the port authority) ♦ Merging all inspecting institutions into one authority (Mongolia, Bosnia-Herzegovina) – leaving taxes, infrastructure regulators outside ♦ Merging inspections to centralize functions – getting rid of decentralized structure of the same inspectorate