A guillotine with brakes

Andriy Astrakhan, director of the Legal and Regulatory Reform Department of USAID/BIZPRO, says Ukraine ranks with the world’s most overregulated countries. Whereas several hundred normative acts were subjected to filtration in Hungary, the same process awaits Ukraine, the difference being that our country has tens of thousands of documents.

The strategy of rapid deregulation, known as the “guillotine” has proved effective in many countries as a means of combating corruption and other obstacles to the development of business. Now it is Ukraine’s turn to critically assess the multitude of regulatory acts and chop them ruthlessly. However, the outward simplicity of this process is quite misleading, because the Ukrainian bureaucratic machine is not going to surrender its positions just like that.

The Ukrainian “guillotine plan” is an initiative launched by USAID/BIZPRO, the State Regulatory Policy and Entrepreneurship Committee of Ukraine, and the Council of Entrepreneurs at the Cabinet of Ministers. This year the implementation of this project began in six Ukrainian oblasts, but the organizers quickly realized that introducing these changes on the national level is unavoidable. An accelerated revision of central and regional regulatory acts was launched on June 1, when President Yushchenko signed an edict to this effect. Even then, Ukraine decided to surprise the rest of the world by setting a very demanding timeframe — a mere three months (Astrakhan says this has never been done anywhere). According to the edict, commissions were established within all executive bodies, consisting of an equal number of regulatory bodies and economic agencies, as well as businessmen and members of the scholarly community. Working at an accelerated pace, they must study every document to determine whether it conforms to the principles of the regulatory policy, its effectiveness in terms of its impact on business, and whether it is necessary in the first place.

As a result of this filtration, some 10,000 regulatory acts issued by central and regional authorities were included in three lists: (a) documents that correspond to the basic principles of regulatory policy; (b) documents subject to cancellation; (c) documents that need to be amended. In addition, 5,000 documents of local self-government authorities were analyzed. Astrakhan says the results of the first phase of “Operation Guillotine” are as follows: 34 percent of local self- government regulatory acts must be abolished, as well as 55.5 percent of central and regional acts. Oleh Miroshnychenko, director of the Regulatory Policy Department of the State Regulatory Policy and Entrepreneurship Committee of Ukraine, specified that the 55.5-percent figure includes 66 presidential edicts, over 200 regulatory cabinet resolutions, some 600 documents issued by central executive authorities, and 4,500 regional documents. All told, 53 percent of all regulatory documents are slated for repeal.

But this does not spell the end of rapid deregulation. In early September a cabinet resolution sanctioned a follow-up to this effort. In the second phase the working groups will be conducting an accelerated analysis of the entire legal framework according to “economic sectors and spheres.” At the same time nearly 1,500 regulatory laws will be analyzed. In other words, this is just the tip of the iceberg, but according to Astrakhan, the main thing is to begin.

Of course, it is difficult to expect that the guillotine principle will be implemented without a hitch, considering the undisguised or concealed resistance from bureaucrats on all levels. In some cases they joined this effort very late (among those “reporting late for work” Astrakhan mentions the ministries of finance, health, tourism, and culture). Elsewhere, people tried to take things into their own hands, regardless of what businesspeople and experts had to say. The style of work of the Guillotine group at the Ministry of Industrial Policy is a case in point. One of the group’s members, Olena Brodovska, who is a legal adviser to USAID/BIZPRO, said that the group’s first and only meeting took place in mid-July, when most of the members received the lists of documents during the meeting. This made constructive work impossible, exactly what the bureaucrats may have had in mind. To make matters worse, the few proposals that were submitted were not entered in the minutes. Later, when the members of this work group assembled to take part in public hearings, they were offered final lists that had been strangely transformed. Whereas in the July list 77 regulatory acts were slated for repeal and 16 for retention, the October list stated 69 and 42, respectively. None of the officials at the Ministry of Industrial Policy could explain the changes or what happened to the proposals from other members of the group. Given this approach to deregulation, objective and comprehensive revision of the regulatory base and the project’s success can hardly be expected.