1. Developing Regulatory Impact Assessment In Azerbaijan
The SME TEST
Baku, September 2016
Charles-Henri Montin, Smart Regulation Adviser
for EU, OCDE, World Bank
(former Senior Regulatory expert, Ministry of finance, France) 1

2. Source for SME Policy in AZ
C.H. Montin, Baku

3. SME policy in Azerbaijan
« Government has been proactive » since 2012
One-Stop Shop introduced for company registration & other measures to raise Doing Business ranking (highest score in EaP)
« Need for a more structured and strategic approach » incl. coordination mechanism
Updated SME definition in June 2015
But previous programme ended in 2015
2 definitions of SME; micro –ent. not defined
No legal requirement to conduct RIA but draft legislation in Ministry of Justice
C.H. Montin, Baku

4. Possible goals of SME policy
Most countries have a goal to reduce, or at least ease, the legal and regulatory burden on SMEs, to be achieved by (inter alia):
The development of a better understanding of the impact of new legislation and regulatory requirements for SMEs & micro-ent. (SME Test)
The simplification (and burden reduction) of adm. and regulatory obligations for MSMEs.
A change in culture to ‘think small first’ and ensure that policy goals can be reached with a minimum of unnecessary burdens.
C.H. Montin, Baku

5. Steps of SME Test (=RIA)
Assessment of policy problem
In EU and OECD consultation of stakeholders
Alternative options generated
Cost benefit analysis of options RIA
Policy proposal translated into legislation
Review of draft by a technically competent body before it is submitted to the Cabinet of Ministers
Consideration by the Cabinet before presentation to parliament or for signature by a Minister if the proposal is for secondary legislation (Bye-Laws, regulations and private laws).
C.H. Montin, Baku

6. Where would a test fit?
Most logical place is to start thinking about the impact of the proposal on MSMES when new regulations are proposed and at each stage of the process.
Therefore, officials in each ministry concerned with the development of new legislation (regulations) should be aware of the potential impact of their proposals on businesses especially small businesses.
C.H. Montin, Baku

7. What type of test for Azerbaijan?
Two phase test proposed for AZ.
The first phase is that officials preparing new legislation should undertake a preliminary assessment of the impact of a proposed new law on SMEs.
This will be a sort of intuitive analysis where officials ask a series of simple questions consult with those involved in businesses likely to be affected and make a qualitative analysis of what needs to be done.
C.H. Montin, Baku

8. Type of Test: Second phase
If the preliminary assessment suggests that there will be a substantial impact of a proposed new law on SMEs, the second step will be to undertake a cost benefit analysis of the impacts of the proposed legislation.
It will be necessary to assess the costs and benefits for the economy and society and take account of the costs and benefits for both the public sector and the SMEs concerned.
These assessments should help ensure that the benefits of the proposal do not outweigh the costs.
C.H. Montin, Baku

9. Components of SME Test
They mirror the RIA process while including the zoom on SMEs:
Definition of policy and search for alternatives to regulation
Consultation of stakeholders
Cost-benefit analysis of options
Reporting, including possible alleviation/reduction of burdens on SME by amending the initial draft
C.H. Montin, Baku

10. Which texts must undergo Test ?
Depends on the type and subjet matter of draft legislation.
For example, proposed legislation concerning family law is not likely to have an impact on SMEs.
Answering this question involves making a broad assessment of the characteristics of the legislation and whether businesses or sector(s) likely to be affected and, if so, how?
C.H. Montin, Baku

11. Elements to consider & measure
The number of businesses and their size (micro, small medium or large enterprises),
The proportion of the employment concerned in the different categories of enterprises to be affected,
The weight of the different kind of SMEs in the sector(s) (micro, small medium or large enterprises),
Links with other sectors and possible impacts on subcontracting
C.H. Montin, Baku

12. Do not forget to consult stakeholders
Consultation documents should be clear, concise and include all necessary information
As many stakeholders as practicable should be consulted
There should be sufficient publicity supporting the consultation and the tools used should be adapted to the stakeholders concerned
Sufficient time must be allowed for the consultation exercise to be effective
C.H. Montin, Baku

13. Types of costs & benefits
Administrative costs
Substantive costs
Cost and impact comparisons
Spill-over effects related to third-party com-pliance with legal (indirect compliance benefits);
Wider macroeconomic benefits, including GDP improvements, productivity enhancements, greater employment rates, etc
Other benefits, (difficult to measure in monetary terms) include protection of fundamental rights, social cohesion, reduced gender discrimination, etc.
C.H. Montin, Baku

14. Can the impact on SMEs be reduced?
full exemption from the scope of the proposed legislation,
partial exemption from the scope of the proposed legislation,
simplification of the procedures for SMEs faced with new legislation or
amendments to existing legislation
Partial exemption, exclusion or simplification
C.H. Montin, Baku

15. Next - today We want you to divide into groups:
1/ will consider a case study (draft regulation) and apply the two steps approach and outline possible results;
2/ will consider the possible introduction of the SME Test in Azerbaijan and report on challenges and opportunities involved.
Each group to appoint a person to present the group’s work to the Workshop
C.H. Montin, Baku

16. To learn more about the SME Test
The European Commission methodology
The Small Business Act for Europe
The French methodology (short brochure)
The UK Manual on Better Regulation, see p. 27
The Canadian Small Business Lens Checklist (excellent)
Introduction of SME Test to Morocco, by C.H. Montin, with presentations (in French) for the process to set-up a Test
All presentations on
C.H. Montin, Baku