Speech of Mrs. Greta Minxhozi, Deputy Country Manager to the national Conference “Regulatory Reform for Improvement of the Business Climate, a major obligation and undertaking of the Albanian Government”

Regulatory constraints to business operations and inadequate infrastructure are among the key barriers to business operations.  Albania faces two key challenges in fostering sustainable private sector growth and increased investment:

1. Removal of regulatory and administrative constraints affecting business entry and operations;
   
2. Creation of suitable infrastructure that would enable businesses to export to regional and European Union (EU) markets.

Addressing this agenda will help to encourage new source of Total Factor of Productivity (TFP) growth as well as capital accumulation in the private sector.

Both the 2005 Administrative and Regulatory Cost Survey (ARCS) and the 2005 BEEPS (Business Environment and Enterprise Performance Survey) indicates that the most problematic areas affecting business entry and operations are anti-competitive practices (79 percent), electricity (70 percent), tax rates (72 percent), corruption (69 percent), macroeconomic instability (68 percent), economic and regulatory policy uncertainty (59 percent), and information on laws and regulations (53 percent).

Unnecessary administrative rules and procedures create obstacles to entry into markets and discourage growth of foreign investors and local entrepreneurs. The business licensing regime offers a clear example of difficulties affecting business entry. In Albania, about 30 institutions are involved in the issuance and administration of over 120 licenses, permits, authorizations, certificates or consents which are regulated under different laws, decrees, guidelines, regulations and instructions issued by different ministries and government entities.  In the World Bank’s 2007 Doing Business report, Albania ranked at 120 in 2006 in the overall ease of doing business, and as low as 161 in terms of the specific issue of ‘dealing with licenses’.

The Government has recognized the need to further strengthen the regulatory capacity over the (formal) market, remove administrative barriers and tackle informal activities. Reforms of the regulatory framework are under way and the Bank is supporting their implementation through two important operations;

1. BERIS (Business Environment Reform and Institutional Strengthening Project) that became effective at the beginning of March 2007 and the
2. DPO (Development Policy Operations program), that was approved by the Bank’s Board of Directors on March 29, 2007.

The BERIS project will assist the Government in: (i) facilitating business entry and operations in the formal economy; and (ii) strengthening the enterprise sector’s capability to increase exports towards regional and EU markets. Expected project outcomes would include reduced costs, time and steps for businesses to comply with regulations affecting business entry and operations.

The BERIS emphasizes stakeholder participation and extensive consultations with private sector players. The project would help institutionalize involvement of business community in the design and implementation of reforms by developing mechanisms for public-private consultations, both at the highest level as well as the regular day-to-day interactions between key ministries/institutions and business community.  It also stresses the importance of increased public information disclosure for all public institutions. 

Important steps were already undertaken by the Government in parallel with the process of preparation of BERIS;

Following Foreign Investment Advisory Service (FIAS) recommendations, the Government has established a Regulatory Reform Task Force, chaired by the Prime Minister, for the formulation and monitoring of regulatory reform plans.  The Prime Minister has given the Minister of Economy, Trade and Energy the mandate to implement these regulatory reforms.  This agenda is being coordinated and implemented by the Trade Facilitation Unit within the Ministry of Economy, Trade and Energy (METE)

With support from seven technical working groups, the Task Force has developed a Regulatory Reform Action Plan, endorsed by the Council of Ministers, to guide implementation of reform actions in the next three years.  The new institutional framework will help to reduce regulatory and administrative barriers through the adoption of methodology such as the guillotine and the Regulatory Impact Assessment (RIA).

Already, the framework has yielded reforms of several laws and regulations, and in some cases implementation has begun.  For example, self-declarations have substituted for state licensing in the case of professional services, and multiple documentation submission has been eliminated in the public works and transportation sector.

The DPO objectives mirror the twin pillars of the CAS—private sector led growth, and improved service delivery—and its third objective, the cross-cutting governance actions, mirror the governance filter of the CAS.  Moreover, given the CAS focus on governance, the DPO is an appropriate instrument to respond flexibly to evolving issues in a country where governance remains a challenge The DPO will support the following specific actions with regard to business climate improvement:

• Improve the framework for government concessions.  The DPO supports the passing of a new concessions law that embraces the principles of transparency and a competitive bidding process, and very strictly define the conditions under which sole sourcing would be admissible. 
  
• Strengthen the capacity of the Trade Facilitation Unit within the METE to implement regulatory reforms with proper consultation mechanisms with the business sector.  This will be done with the help of the Business Environment Reform and Institutional Strengthening (BERIS) project, and will help ensure sustainability of the regulatory reform process.
  
• Prepare recommendations for eliminating superfluous licensing requirements in selected sectors.  Assistance for implementation of these measures would be made available by the BERIS project.

Subsequent DPOs would support improved systems and their implementation, i.e., the adoption and implementation of a regulatory management system for improving quality of new and existing regulations; and the review and streamlining of regulatory regimes in licensing and inspections They would also support the review of implementation experience of the new concessions law and subsequent incorporation of these and any other concerns into any required amendments to the law.  

The Bank looks forward to the continuation of the collaboration with the Government for the implementation of these two important operations as well as to the achievement of concrete and sustainable results of these reforms that will eventually materialize in the growth of the private sector and in country’s prosperity