The Significance of Inspection Reforms for the Improvement of the Business Environment in Serbia Slavica Penev Andreja Marušić

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 FrameworkIT 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 areaMain approachNew inst.ICT Bosnia & Herzeg. (Rep.Srp) Yes All inspections except tax Centralized/ unified inspectorate General Inspectorate Yes Croatia Yes Most of inspections Centralized/ unified inspectorate General Inspectorate Yes Latvia1999Yes Most of inspections Coordination Inspectorate Coordination Council Yes Poland Yes Selected inspections Coordination General Trade Inspectorate Yes Slovenia2002Yes Most inspections CoordinationInspection 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 progress Comprehensive reform underway in the area of Environmental Protection, driven by the EU agenda Creating a coordinating body In progress The Government adopted the recommendation for the establishment of an inter-ministerial coordination body for the reform of inspections Creating a centralized inspectorate Under consideration/discussion Coordinating 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 Draft Market Surveillance Law Common legal frameworkIn progress The 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 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 Limited adequate 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 None However, 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