Improving the Business Environment Institutionalizing a new reform process Philippe de Meneval MOROCCO

The Political Economy Challenge  In several MENA countries, political will for reform often exist… - High Level Public Declaration -Challenge of numerous rankings/ratings: Doing Business, Economic freedom, Transparency, Notation agencies, etc. -WTO, EU accession, etc.  …And Assessments of Investment Climate are numerous –World Bank: ICA, Doing Business, Administrative Barriers Assessment, etc. –Others: OECD, USAID, EU, consulting firms, etc. 2

The Political Economy Challenge  But reform initiatives get bogged down –Overambitious public announcement… –Meetings after meetings of low capacity Working Groups… –Private sector demands a lot… and disappears midway –Disagreement between public agencies  Consequence? –Unrealistic or poorly designed initiatives –Piling up of strategies, “Reform fatigue”, skepticism –Excessive focus on quicker “quick wins” and “low hanging fruits” 3

The Political Economy Challenge Administrative“One stop shop”, single window, inspections, licensing, standardized forms and corporate documents LegalCommercial code, company law, collateral law, bankruptcy, labor law, infrastructure laws, PPP JudicialCourt procedure, case management, performance measurement of judges Electronic services (eGov) Company/collateral registry, Credit bureau, Electronic signature, single ID, Paying taxes, Legal portal Tax and Subsidies Corporate tax, VAT, social contribution, registration duties, selective interventions 4 The challenge of implementing PSD reform is often not well assessed - A complex web of institutions, norms, rules, procedures, tools

The Political Economy Challenge  Modifying one element of the business environment often has an incidence over several others –E.g. developing eGov requires legal change, institutional change –E.g. simplifying business registration requires tax, IT and legal change  This “chain effect” poses a complex implementation challenge –Implement several reforms at the same time 5

The Political Economy Challenge  Stakeholders are not prepared to deal with this complex challenge –Local political economy - lack of inter-ministerial coordination –Weak administrative capacity in project management –Private sector incentives are not clear –Level of expertise is insufficient  “The reform process is not the sideshow… …it’s the main event” Stiglitz,

WB engagement in PSD / Business Environment in Morocco – ICA diagnosis and “Doing Business”, followed by several unsuccessful TAs for implementing reforms on the ground – DPM for Economy requests “QUICK WINS” Sept WB teams points to weaknesses in the reform process and lack of efficient inter-ministerial coordination -- a survey is conducted to assess 10 inter-ministerial committees Feb The team proposes a new institutional design : establishing a “Project Cycle”, a High Level Inter-Ministerial Committee (Draft Decree) and a Permanent program Unit March 2009 – DPM for Economy approves the proposal and decides to implement it with the assistance of the WB

RM tool (1): Focused Stakeholders Analysis - Analysis: focused on 10 existing reform working groups set up by various ministries - 4 dimensions: -Quality of preparation of reforms: quality of preparation of TDRs, expertise, consultation with stakeholders -Clarity of methodology - Involvement of decision-makers - Capacity to move to implementation - This Analysis was used to convince DPM for Economic Affairs that resolving the “Doing Business” challenge was not only a matter of “Quick Wins”

RM tool (1) : mapping transactions costs Approval Ex-ante transaction costs Ex-post transaction costs Insufficient preparation of the reform proposals (long lists of “reforms recommendations”) Lack of consultation with stakeholders Lack of an efficient inter-ministerial coordination/decision process Preparation Lack of human and financial resources Poor monitoring system Absence of a conflict resolution mechanism Poor quality-control and absence of formal procedures Implementation The stakeholders survey helped us to identify the major transaction costs that hinder the reform process

RM tool (2) Establishing a streamlined reform process for Morocco A uniform “Project cycle/Project management” across ministries (preparation, approval, implementation), monitored by a specific unit set up in the DPM for Economy Inter-ministerial “Investment Climate Reform Commission” established by Decree presided by Prime Minister / Deputy Prime Minister limited membership to avoid large meetings detailed charter - “internal rules” approves an Annual Action Plan Ownership reinforced Project teams with clear mandate (official letters) Structured public-private dialogue Periodic meetings of the reform Commission Central expertise fund set up to resolve weak capacity: IDF trust Fund of 350K

A streamlined reform process for Morocco National Committee Public-private Working groups Project teams Reform proposals Reform mandates Support Unit Quality control Reporting