1. Incentives for Implementation of Regulatory Reform: A Comparative Survey of Federal and Regional Government Officials in Russia The survey is conducted by CEFIR/NES with participation of NISSE and support of World Bank This study is conducted on behalf of the Administration of the President of Russian Federation and is initiated by the Ministry of Economic Development of RF in the framework of Presidential Decree # 797 1 1

2. Previous study:
CEFIR/NES Monitoring of administrative barriers to the development of small business in Russia :
Short summary of six rounds:
Before any of the deregulation laws took effect, the practices in the areas of registration, inspections, licensing, and certification were found to be very far from the benchmarks established in the new legislation.
The new laws on inspections (August 2001), licensing (February 2002) and registration (July 2002) have induced significant positive changes in these areas of regulation.
The reforms did have a beneficial effect on the regulatory burden. Enforcement of the new laws improved gradually. Still the degree of administrative pressure on the small business remains significant.
Progress of reforms is not geographically uniform: better results were achieved in localities with better fiscal incentives, more concentrated industry, less corruption, and higher initial share of small business
In the 6th round of Monitoring conducted in 2006 there has been a significant worsening of corruption and unfair competition. Inspections and, particularly, tax inspections have become a more serious problem for business 2

3. Goals of the study
Get detailed information for analysis of the incentives and constraints to implementation of regulatory legislation in different government authorities and subjects of Russian Federation
Find out the incentives of government officials to implement reforms
Compare the results of Monitoring of Administrative Barriers to Small Business Development in Russia (the survey of small business) with the assessments of the regulatory authorities representatives
Provide government and the central authorities with information on the above issues and work out recommendations for promoting the reform aimed at further reduction of administrative barriers to small business at the local level

4. Results
Effectiveness of reform implementation is positively affected by:
Positive personal attitude of officials to the reforms
Officials’ knowledge of the regulatory laws
Control by higher-level authorities

5. The sample 1430 government officials were surveyed:
13% - heads of government departments and agencies and their deputies
87% - subordinates

6. Regional coverage 20 regions in 7 federal districts
Altai Krai
Amur Oblast
Kaluga Oblast
Krasnodar Krai
Krasnoyarsk Krai
Kurgan Oblast
Moscow
Moscow Oblast
Nizhny Novgorod Oblast
Novosibirsk Oblast
Perm Krai
Primorsky Krai
Komi rep.
Rostov Oblast
Samara Oblast
Saint Petersburg
Sahalin Oblast
Severnaya Ossetia rep.
Smolensk Oblast
Chelyabinsk Oblast
The survey took place in September – December 2008

7. Structure of the questionnaire
Reform
General attitudes toward reforms
Changes in the organization’s work as a result of the reforms
Attitude to future reforms
Information on the respondent’s work experience and current position
Information on the organization’s work
Regulation of work
Independence of the organization from external officials
Certification and training of employees
Movement of staff within the organization
Interaction of the organization with business, the society, the state
Assessment of organization’s activities
Factors of activities’ effectiveness
Attractiveness of public-sector work
The prevalence of corruption
Respondent’s personal information

8. Respondents Average age - 43 years (Fire inspection – 33)
2/3 of respondents are employed in their region of birth
On average the respondents have been employed:
4.4 years in the current position
7 years in this organization
13.5 years in public sector
observed the reform at another work place
Previously were employed in other government organizations, state enterprises or just graduated from universities
Male – female proportion 50:50
Almost all have higher education
Nationality - more than 90% are Russians
Average wage rubles per month (in the first half of 2008)
Respondents’ wage contributes 74% of family income

9. Government officials believe that their opportunity wage in private sector is substantially higher than current wage level
If the person of your level of skills worked in private business his wage would be:

10. Deregulation reform: government officials attitude

11. Was the reform a step in the right direction?
75% of respondents support the reform
Was the reform a step in the right direction?

12. Support of different reform measures is not uniform20 40 60 80
100 %
Limitation of inspection duration
Ban on scheduled inspections
of small enterprises over the
first three years of their existence
Cut of the number of licensed
types of activity
Limitation on registration duration
Increase in the minimum period
of validity of licenses
Restriction on the number of
planned inspections
Introduction of one window
for registration
q_1
Categorically against
Mostly against
Mostly for
Support fully

13. Support of tax reform measures
Limiting the number of planned on-site inspections (no more than once every two years) – 90%
Limiting the time of an on-site inspection to two months in routine cases – 51%
Allowing the taxpayer to pass an on-site inspection in the location of the tax agency if the taxpayer is unable to make premises available – 80%
Limiting the period of suspension of an on-site inspection to 6 months – 77%

14. Changes in the organizations as a result of the reform

15. A considerable delay between the law approval and its implementation in everyday practice
20.3%
24.6%
20.6%
9.9%
Less than a month
1-2 months
3-6 months
from 6 months
to one year
More than 1 year
q_11
On average – 5 months
Faster in Tax inspections
Slower in Fire inspections and Rostekhnadzor

16. Reform is poorly equipped with resources
70-80% respondents consider that reform was poorly equipped with
Financing
Technical support
Instructions
Qualified specialists
Staff declined by 12% as a result of the reform (Rospotrebnadzor – 40% decline, Roszdravnadzor – 23% increase)
Personnel with new skills was employed in 35% of organizations

17. Reform led to increase in the scope of authority How has the scope of your authority changed as a result of the reform?
Law on registration: 70% of the respondents reported the increase of the scope of their authority
Laws on licensing and inspections: no consensus

18. Effect of the reform on labor intensity, risks and administrative burden
68% of the respondents consider that labor intensity of conducting an inspection has increased (for the law on inspections – 75%);
Level of risk for population
Did not change – 37%
Increased – 41%
Administrative pressure on business
Decreased – 38%
Did not change – 38%
Frequency of conflict situations
Did not change – 54%
Increased – 35%
On average increased for the law on registration

19. Level of corruption did not change
On average 11% of respondents reported that the level of corruption has increased and 29% − that it has decreased.

20. Attitude toward future reforms

21. Transition to the system of notifications – opinions vary Do you agree that a system of notifications as opposed to permissions needs to be universally introduced?
% disagreement

22.    
Reasonability of introducing new measures aimed at liquidation of redundant administrative barriers 22

23. To assess respondents’ level of knowledge of legislation they were asked to agree or disagree with the following statements:
By law, licenses are valid for no more than 3 years
The licensing agency makes the decision about the issuance or refusal to issue a license no more than 60 days from the day the license application is received with all required documentation
By law, an inspection of an enterprise cannot take longer than 45 days, and in extraordinary situations can be extended for another month
License supervision is not covered by Federal Law 134
During an inspection, originals of documents relating to the object of inspection can and must be confiscated
By law, government registration is completed in 14 days
Documents for registration can be sent in by mail

24. Officials reveal poor knowledge of laws which they are enforcing20 40 60 80
100
percent
Registration by mail
Duration of registration process
Confiscation of original documents
during inspection
Duration of inspection
Law on license control
Duration of decision making on issue of license
Term of license validity
q_85_special
Wrong answers
Correct answers
Average responses over respondents whose expertise is in the relevant regulation

25. Effectiveness of work – agencies have different opinions
Effectiveness of risk reduction for the population - 3% responded “low”
Effectiveness of tax and levies administration – no one responded “high”
Cost to business in terms of time and finances – 9% responded “high”
Factors that lower effectiveness

26. Problem of operations:
personnel shortage
Average organization is staffed only at 89% with no significant variation across agencies
Reasons of shortages
Answer frequency, %
Low salary 63
General lack of specialists of the required skills (qualification) 46
The need to strictly adhere to instructions and regulations 10
Fear of responsibility for violations of requirements or damage caused by a firm under your regulation 8
Negative social perception of representatives of regulatory agencies 2

27. Incentives for civil service
Presence of the following factors is reported by most respondents
Stable employment (95%)
Good possibilities for personal development (73%)
Social status, prestige (62%)
Personal interest and satisfaction in this work (78%)
Attraction to the goal and mission of this organization (70%)
Good relationship among colleagues in the organization (86%)
Absence of the following factors is reported by most respondents
Good pay (78%)
Social benefits (58%)
Flexible work schedule (90%)
Reasonable workload (65%)
Supplementary income (97%)
Availability of government-provided housing or transportation (91%)
Possibility of leaving for a good position in business in the future (81%)
Possibility of growth in the civil service (career growth) (60%)

28. Who is the main beneficiary of the work of your organization: state or population? Response depends on the agency

29. Analysis of the matched database: survey of entrepreneurs and survey of government officials
Monitoring of Administrative Barriers to Small Business Development in Russia by CEFIR (6 rounds in years, )
2000 entrepreneurs in 20 regions of Russia
Barriers evaluated as:
Number of sanitary and fire inspections
Duration of registration process
Number of licenses issued for less than 5 year term
Observations – entrepreneurs’ responses in 2006
Authorities variables – responses averaged over particular agency in particular region

30. Results: factors that have positive effect on the compliance of regulatory practice with laws
A positive personal attitude of the officials toward reforms
Higher level of officials’ qualification (human capital)
Larger number of employees with new skills
Higher quality of training
Higher level of knowledge of regulatory laws
Larger share of officials with previous experience in private sector and smaller share of those who worked in regional jurisdictions
Higher influence of federal, regional and local authorities on the activities of local regulatory officials
Better defined procedures of conflict resolution between business and regulatory agencies

31. Better knowledge of law decreases law violations
Dependent variable:
Number of planned fire inspections, logarithm
Dummy for license duration below 5 years
Age of firm (in logarithm)
0.071 *
0.138
(0.043)
(0.136)
Dummy for new firms
-0.041
(0.074)
Share of correct answers in the relevant agencies
-0.163
***
-0.373
(0.051)
(0.203)
Industry dummies
Yes
Constant
0.183
1.076
(0.194)
(0.843)
Observations
1201
223
R-squared
0.06
0.09
Standard errors in parentheses
* significant at 10%; ** significant at 5%; *** significant at 1% 31

32. Recommendations
Higher requirements to officials’ knowledge of regulatory laws, regular evaluations
More rigorous control by higher-level authorities
Better information support to the reform
Clear regulation of authorities’ interaction with business and investigating and handling of complaints from business