Final draft operational plan ukraine guillotine

Operating Plan and Proposed Budget
for a Regulatory Guillotine Reform in
Ukraine
Final Draft
May 27, 2015
In partnership with:

FOR REVIEW/DO NOT CIRCULATE/NOT FOR CITATION
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Contents
1. The Purpose of This Operational Plan .............................................................................. 2
2. Background............................................................................................................................ 4
3. Summary and Goals of the Reform in Ukraine ................................................................ 6
4. Benefits, Costs, and Risks of the Guillotine Reform ....................................................... 8
a. Benefits of the Guillotine .............................................................................................. 9
b. Costs of the Guillotine................................................................................................. 12
c. Risks of the Reform ........................................................................................................ 14
5. Detailed Operational Plan.................................................................................................. 15
a. Scope of the Reform ................................................................................................... 16
b. Political Leadership and Role of Institutions in the Reform .................................. 18
c. The Process of the Reform............................................................................................ 24
d. Use of IT Management Software .............................................................................. 29
e. National Target for Cost Cutting, Cost Impact Assessment, Key Performance
Indicators in the National Guillotine, and the Role of the National Reform Council .... 31
f. PR, Communications and Consultation Strategy....................................................... 34
g. Transition to Long-Term Regulatory Quality Strategy ........................................... 37
Annex 1: Draft Mandate for the Guillotine in Ukraine........................................................... 39
Annex 2: Baseline budget for the Guillotine........................................................................... 41
Annex 3: Ukrainian Regulatory Institutions in the Scope of the Guillotine........................ 47
Annex 4: Gantt chart for Guillotine Reform, Ukraine............................................................ 49
Annex 5: Human Resources of the Guillotine Unit ............................................................... 53
Annex 6: Meetings held by the JC&A and EB teams 24-30 April 2015............................. 57

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1. The Purpose of This Operational Plan
At the request of Government, this report proposes a detailed operations plan for an
expedited national regulatory guillotine in Ukraine, with a proposed baseline budget that can be
up-scaled or down-scaled as needed. The task facing Ukraine is urgent in the current economic
downturn, given the thousands of outdated and anti-market regulations inherited from past
regimes. These rules foster corruption and waste State and economic resources. The purpose of
the national regulatory guillotine is, within a broader economic reform program aimed at important
constraints to economic development, to deepen and broaden current deregulation efforts to
establish a national regulatory environment that strengthens the rule of law and good governance,
better protects the environment and human health and safety, reduces cost and risk burdens, and
better promotes private sector activity and economic development.
This plan represents Phase 2 of the national deregulation strategy formulated by the
National Reform Council. The guillotine is a necessary part of a much bigger program based on
“better regulation” principles, which includes alignment with European standards under the EU-
Ukraine Association Agreement and the Deep and Comprehensive Free Trade Area (DCFTA),
writing multiple new laws and rules to fill in gaps, upgrading inspection and judicial procedures,
and sustaining “better regulation” through institutionalizing impact assessment and quality control
processes. All of these must be coordinated so that they support each other.
This document is the blueprint for the guillotine reform for the Government of Ukraine, an
elaboration of the components of this complex process needed for success. That is critical so that
Key points in the design of the guillotine in Ukraine
 Comprehensive approach across all legal norms at national level affecting businesses
and citizens, estimated at 7,000 to 10,000
 Coordinated to support other important reforms such as alignment of Ukrainian and EU
standards
 Potential benefits to Ukraine are estimated at a little over $1 billion to $1.3 billion/year,
depending on the benchmark used.
 Reform to be completed progressively over 36 months, with very early results beginning
from month 2 when the first priority reform packages can be produced.
 A CMU Resolution would set up the legal framework and substantive targets, assigning
responsibility to a Special Committee of Government for Deregulation, the Minister of
Economic Development of Trade, and a Guillotine Unit attached to the Ministry.
 Active engagement of key political stakeholders including Prime Minister.
 Full transparency and participation from civil society and business groups.
 Full baseline budget for core teams and processes is $9.96 million over 3 years.
 Smaller rapid start-up budget of $1.52 million (part of the full budget) is estimated to get
the reform underway quickly with available staff, while at the same time procuring the full
resources for the 36-month reform.
 After inventory is completed in months 2-3, the need for up or down scaling will be
assessed depending on timetable of Government.
 Over the course of the project, guillotine team will assist in setting up prevention.
mechanisms and building capacities in government staff to sustain the gains of the
reform in future.

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the reform can be launched smoothly with full understanding of what, who, and how. To
accomplish that, this document provides:
 A customization document that adapts the Regulatory Guillotine approach to the Ukraine
context, in the sense of scope, institutions, procedures, timing, results, and budget, as well
as other reforms underway. The most widely used regulatory guillotine process1
requires
extensive customizing and local input to work within the context of a particular
government, political setting, and administrative process.
 A political document for the Government that enables its decisions to move ahead with
the reform. The plan and its executive summary lays out the rationale and benefits of the
reform, and the concrete decisions and steps needed for the guillotine to operate. It lays
out options when choices must be made that affect performance. A consultation document
that reflects the views of the political leaders and social partners. The purpose and process
of the guillotine should reflect national views about what is needed for Ukraine.
 A budgeting and staffing document that sets out the resources and conditions needed for
the guillotine to operate, with the flexibility to upscale or downscale as the work proceeds.
The budget component of the document is meant to provide the basis for resource and
hiring decisions by the Government of Ukraine, that also will be helpful to donors in
developing their own procurement documents such as specific project plans and TORs
within the scope of their respective programs. A financing strategy is necessary at the
outset to ensure that the project is fully resourced so that it can proceed effectively and on
schedule. Sources of financing will likely be mixed among the Government of Ukraine and
donors, and should be confirmed through discussions and agreement with donors on the
basis of a clear project description and budget. Typically, the government wants to finance
parts of the budget, either in cash or inkind, such as by providing office premises and the
salaries of civil servants involved in the ministries and agencies. The budget is written as
a modular document to maximize flexibility and allow different sources of financing to be
used for different inputs, including GoU and donor financing. For example, a small “start-
up“ budget is identified that will allow the reform to get off the ground quickly, while the
procurement processes for the full reform are underway. And, since it is impossible to
anticipate every eventuality in the original plan, periodic reviews to adapt the resources to
changing circumstances are built into the plan.
 A vision document that defines the performance that should be achieved, and means of
measuring and reporting that performance so that the Government and donors can
compare performance to promises. We believe that the guillotine should be economically
relevant, that is, to produce cost reductions and improvements in economic freedom that
are substantial enough to change economic behavior in the real economy. As in best
practice guilllotine reforms, we propose a rigorous cost testing of legal norms and reforms
against clear targets, reported by period and by ministry or agency so that performance
against schedules and cost reduction targets are clear to all.
This plan reflects discussions with high-level Government officials, members of the
National Reform Council and the Parliament, private sector stakeholders, and donors in Ukraine
(see Annex 6). It is based on best practices in the regulatory guillotine method, drawn from the
experiences and evaluations in a dozen countries that have implemented the method over the
1
Jacobs, Cordova & Associates has trademarked Regulatory GuillotineTM for its particular guillotine
design, but the term has become broadly used to mean a generic program of rapid and systematic
regulatory reform.

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past several years. It is prepared by a team from Jacobs, Cordova & Associates, and the Easy
Business NGO in Ukraine. Thanks is given in particular to Minister Aivaras Abromavičius,
Ukrainian Minister of Economic Development and Trade, for his support in developing this
strategy.
2. Background
In the face of continuing sharp economic decline in Ukraine, appropriate strategies for
national economic recovery are top government priorities. At the regulatory level, several related
strategies are underway, including domestic regulatory reform and integration into international
markets, particularly the European Single Market.2
While Ukraine moves to implement the Deep
and Comprehensive Free Trade Area (DCFTA) with the EU through harmonization of laws, norms
and regulations in trade-related sectors, the government of Ukraine (GoU) wishes to move as
rapidly as possible to Phase 2 of its national deregulation strategy.
Coordination of the two strategies will have mutual benefits, as Ukraine will more
effectively implement European standards and compete better in external markets by reducing
unnecessary costs, corruption, legal uncertainties, and market barriers in its domestic regulatory
system.
The aim of this reform is similar to what the EU is doing to reform its own rules, such as
the European Commission’s 2007 Action Programme for Reducing Administrative Burdens on
business and the Commission's new Regulatory Fitness and Performance (REFIT) programme
aimed at reviewing and making EU law simpler and reducing regulatory costs, contributing to a
clear, stable and predictable regulatory framework supporting growth and jobs. Countries moving
to approximate European standards have successfully used the guillotine process to remove
impediments to approximation (see Box 1).
These kinds of regulatory reforms can have substantial economic benefits (Box 2), but
these benefits will be amplified within a larger group of market reforms that address key
constraints on business activity in Ukraine.
Phase 1 of the national deregulation strategy (see Figure 1), supported by international
partners of Ukraine (primarily WBG and EU) and the Easy Business NGO working with the
Ministry of Economic Development and Trade and the National Reform Council (NRC), has
carried out a series of targeted deregulation of laws and other kinds of regulations that were
identified as particularly burdensome or constraining for businesses working in Ukraine Some of
these reforms have now been implemented, such as elimination of 26 licenses and a number of
certificates, such as such as obligatory quarantine certificate for internal grain transportation or
reduction of time for issuance of phytosanitary certificate for grain export from 5 days to 24 hours.
Businesses have responded that they already feel the positive effects of these specific reforms in
their day-to-day operations, which is where the results of regulatory reform must be felt if it is to
have real impacts on economic development.
Phase 2 foresees that, building on the momentum, relationships, and capacities
established in Phase 1, deregulation will be broadened, deepened, and systematized to produce
2
The Ukraine–European Union Association Agreement is a treaty between the European Union (EU) and
Ukraine that commits Ukraine to economic, judicial, and financial reforms to converge its policies and
legislation to those of the European Union.

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far larger effects in the economy. The NRC’s strategy for Deregulation and Entrepreneurship
Development, developed by one of the 18 Reform Task Forces that were set up to design and
implement reforms in different spheres, proposed consideration by the GoU of a broad Regulatory
GuillotineTM
, using best international practices, to count, review, and streamline the national
regulatory frameworks affecting business activity and the day to day lives of citizens.
Phase 3 will institutionalize the disciplines and processes that safeguard regulatory quality
in the government’s continuing regulatory initiatives, using good international practices in
regulatory impact assessment (RIA), stakeholder consultation, regulatory quality reviews, and
other approaches. Phase 3 is already underway in some respects, such as with the nascent RIA
unit of 15 people contained in the State Regulatory Agency. More could be done in Phase 3 in
parallel with Phase 2, and the guillotine project should seek synergies to this aim whenever
possible.
Ukraine is highly regulated, with over 78,000 legal norms on the Unified State Register of
Legal Acts dataset in the Ministry of Justice, and with more regulations added every week
(because many items in the Unified State Register of Legal Acts database are amendments to
earlier regulations, the actual number of legal norms is unknown, but estimated by this team to
be between 7,000 and 10,000). There are almost 70 regulatory bodies at national level in Ukraine
(Annex 3). As in every country, the incentives for reform in Ukraine are mixed, with interests in
support of the status quo present in public and private sectors.
Many of these legal norms are sensible and well designed, and some have been recently
updated. However, there are contradictions, inconsistencies, and complexities through the legal
framework that are burdensome for citizens and businesses, and that discourage investment in
Ukraine. Many of these legal norms generate opportunities for corruption that increase risks of
doing business in the country. The World Bank Group warned recently that "the top concern of
Box 1: Some examples of the guillotine in support of European approximation
Croatia used the guillotine process during its accession process to eliminate confusion and
inconsistency in regulations and contribute towards a well-structured and organized process for
approximation of legislation. Three key inputs into the approximation process were the
availability of a centralised inventory (significantly rationalized after the review process), a
structured partnership between different ministries aimed at securing collaborative efforts to
tackle cross-sectoral issues under the approximation agenda, as well as well as dialogue with
businesses and citizens. All these are aspects of the guillotine proposed for Ukraine.
Hungary also used a national guillotine to prepare its economy for competition after
independence. Systematic reviews embraced a complete, itemized assessment of the entire
stock of regulations. The first review occurred in 1989–90 and focused on removing elements of
the previous regime from laws, subordinate regulations (such as government decrees), quasi
regulations (such as guidelines), and local measures. A second review, in 1994–95, had more
ambitious goals—including improving the efficiency and effectiveness of the public
administration. Both reviews took a guillotine approach, which involved automatic repeal after a
prescribed period of targeted measures that could not be justified by a line ministry to a
challenging body.

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investors is that they do not feel secure when they invest in this country because of corruption."3
Others block or distort economic activity. Economic freedom in Ukraine continues to be rated as
“repressed” by the 2014 Economic Freedom Index (EFI), standing last out of 43 countries in
Europe, and 155th out of the total of 178 countries in the rankings.
Figure 1: National Regulatory Reform Strategy of Ukraine: Three Phases
3. Summary and Goals of the Reform in Ukraine
Tackling this large and complex legacy of regulations built up over decades requires a
focused, organized, transparent, and decisive process with sustained political support. Other
efforts have been made to reform regulations in Ukraine. Notably, in 2005-2007, a national
guillotine process was carried out, with disappointing results. Lessons learned from that process,
and confirmed in more recent guillotines around the world, include the need for high level political
engagement, a structured process based on sound economic principles, and an independent and
dedicated group of reformers who drive the reform against resistance. Those lessons are reflected
in this plan.
The reform presented here will, over 36 months of public-private process, inventory,
catalogue, and review one-by-one those legal norms that affect businesses and citizens (perhaps
around 7,000 to 10,000 legal norms), and eliminate or simplify those that are not legal, needed,
business friendly, or that are vulnerable to corruption. It will proceed through a careful case by
3 See “World Bank slashes war-torn Ukraine's economic outlook”, April 29, 2015, at
http://news.yahoo.com/world-bank-cuts-ukraine-2015-growth-forecast-minus-092905107.html

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case review to ensure that regulations needed in Ukraine to protect health, safety and
environment, such as appropriate SPS rules, are maintained and strengthened as unnecessary
requirements that distract regulators and businesses from the important protective regulations are
removed. While this reform does not directly address the critical area of inspection reform, it will
improve transparency and efficiency of inspections by removing requirements vulnerable to
corruption, and other requirements not demonstrated to be needed to accomplish the mission of
the regulator.
It will produce very early packages of concrete changes as soon as 2 months after project
start-up, and then a stream of packages over the life of the project.
This is an ambitious and rapid framework plan. Its goals are to:
 Substantially reduce the costs and risks of regulations affecting businesses and
citizens by simplifying or abolishing rules such as procedures, and produce concrete
and visible results in 2015, and then regularly through 2018;
 Provide full transparency in the reform process by setting targets for improvements
and reporting publicly on improvements in regulations by regulatory agency over time;
 Reduce corruption and business uncertainty resulting from complex and discretionary
procedures;
 Prepare for trade agreements, particularly implementation of the transparency and
sanitary and phytosanitary (SPS) measures included in the EU DCFTA, by identifying
regulatory impediments, rationalizing and clarifying the current regulatory regimes in
place, including aspects of review based on DCFTA criteria, and supporting the
approximation process;
 Build sustainable capacities such as RIA for better regulation;
This operating plan states the roles and responsibilities of the various institutions involved.
To achieve the goals of the reform, the guillotine should seek, beginning in late Summer 2015, to:
 Complete and re-organize the inventory of legal norms held by the Ministry of Justice
(the “Rada” legal database) so that it includes all consolidated legal norms used at
national levels that affect businesses and citizens, including any unregistered
ministerial norms, together with basic descriptive data.
 Carry out a transparent review of every legal norm affecting businesses and citizens
against clear and standardized criteria to determine its legality, need, and business-
friendliness including corruption vulnerability. This will be done in three stages: first,
by the Ministries, second by an organized stakeholder consultation process, and third
by an expert central unit (the Guillotine Unit) reporting through the Minister of
Economic Development and Trade to a Special Committee of Government for
Deregulation chaired by the Prime Minister;
 Develop concrete recommendations, as well as the draft legal documents needed, to
simplify or abolish all legal norms that are not legal, needed, or are cumbersome for
businesses. The recommendations will be transferred to the Government and, as
needed, to the Parliament, for adoption, in a series of packages through the life of the
reform. The Parliament should consider adopting a fast track process in which, after
the first reading, these deregulation packages are referred to the floor for an up or
down vote;
 Support the political debates with clear information on benefits for Ukraine of reform;

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 Create transparent performance reporting to track cost savings and other benefits of
the reforms adopted, and identify where the process has slowed or produced fewer
results than expected;
 Build capacities wherever possible in the ministries and agencies, including the State
Regulatory Agency, to continue with Phase 3 of the national deregulation strategy to
sustain the reform and safeguard the gains of the reform so that another guillotine is
not needed in ten years.
This plan recommends that implementation of the guillotine should be assigned by Council
of Ministers (CMU) Resolution to a Special Committee of the Government for Deregulation,
chaired by the Prime Minister with the Minister of Economic Development and Trade acting as
Deputy Chair. Technical work will be done by the national ministries, stakeholders through an
organized consultation process, and, finally, a technical unit (the Guillotine Unit) reporting to the
Minister of Economic Development and Trade and thence to the Special Committee of the
Government for Deregulation.
Organizing and providing a sound method that these institutions can use to succeed on
schedule is necessary. Implementation of this reform program is based on four key principles:
1. Active political commitment and involvement in the reform from the highest levels of the
government, including a public commitment to a major reduction in the burdens and risks
of legal norms;
2. Independence and professional capacity in the guillotine unit that is responsible for driving
the reform, communicating with the public, and developing recommended actions;
3. Transparency and the full involvement of key stakeholders, including business
representatives and other interested parties in civil society, in the review of legal norms.
4. Standardized and effective filters and review methods for the reform – based on clear
principles of microeconomics, rule of law, and new public management - to ensure that it
proceeds consistently, transparently, efficiently, and credibly across multiple institutions
and many legal norms.
4. Benefits, Costs, and Risks of the Guillotine Reform
The guillotine reform should produce both benefits and costs. Implementation costs are
likely to be $9.96 million for a three-year reform, as presented in the budget below. If Ukraine
matches the performance of other middle-size economies who carried out the guillotine, between
$1 billion and $1.5 billion per year. Other costs include a possible loss of short-term government
revenues as charges and fees are eliminated, which will be calculated for each reform. These
revenue losses to the government are reflected as benefit gains to the private sector, however.
These estimates are discussed in more detail below.

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a. Benefits of the Guillotine
Potential economic benefits are difficult to measure, since the costs of regulation in
Ukraine have never been measured, and hence
we do not know the baseline costs. If we use the
Vietnamese guillotine as a benchmark, a
socialist economy where the guillotine produced
cost-savings of around $1.5 billion p.a., or 1% of
GDP after a review of 6,000 legal norms, the
benefits in Ukraine would be around $1.3 billion
p.a. (based on a 2015 GDP of $136 billion). If
Ukraine matches the South Korea performance,4
where benefits were estimated at 8.57% of GDP over ten years after a review of 11,000 legal
norms, annual economic benefits in Ukraine would be $11.66 billion over ten years.
Those are annual increases in national wealth, enjoyed year after year if the government
does not replace the eliminated regulations with new regulations. (The benefit of sustaining these
reforms is the key argument for better performance on RIA for all new legal norms.)
These numbers, while abstract, represent reduced costs on businesses and citizens,
freeing up resources for investment and job creation. Relative to the actual cost of regulation,
4
South Korea faced a huge regulatory reform task. Before the guillotine reform in 1998, 63 percent of all
industries – 205 out of 325 -- had regulations controlling market entry. Results of the reform were estimated
by Ha, Byung Ki, et al. (1999) The Economic Effects of Korea’s Regulatory Reform, KIET (in Korean),
Seoul. Ha attempted to estimate the macroeconomic effects of the 1998 deregulation. His study mainly
examined regulatory reforms in economic fields such as employment, entry barriers, price cap, inward
investment, environment, and the land use regulations are investment, environment, and the land use
regulations. First, he estimated the direct effects and the direct net benefits of the 1998 deregulation
measure. Then, using input-output table analysis, he estimated the effects of deregulation on major sectors
of the Korean economy. He then used these results in a macroeconomic model to estimate an overall
economic effect of the deregulation measure. Ha estimated that the level of real GDP in Korea would rise
by 8.57% in ten years, compared to the base case where there was no deregulation. Such increase in the
level of GDP is equivalent to an addition of 0.64% in the annual Korean growth rate. Further, the
deregulation effort would lower consumer prices by 7.18% and lower the unemployment rate by 0.91% in
ten years compared to the base case without deregulation.
Box 2. The Need for Better Regulation in Ukraine
Deregulation and building “better regulation” capacities are part of a larger group of reforms needed to
sustainably reduce costs and risks facing businesses in Ukraine. Many regulations are necessary to protect
public interests such as safety, health and the environment, but regulation should be the minimum needed
to achieve policy objectives, should be designed consistent with competition principles, and should be
carried out transparently and predictably. Unnecessary regulatory costs and risks impede investment,
business growth, real wage increases, and competitiveness.
Major problems confronting businesses in Ukraine are:
 High regulatory compliance costs (both operating and capital costs) reduce profitability (and
therefore reduce investment), real wages (and therefore depress human capital formation), and job
creation (and therefore increase unemployment), and increase consumer prices (and therefore
increase poverty). The cumulative costs of many regulations can be high. In economies that have
not carried out thorough programs of regulatory reform, such as Ukraine, direct compliance costs
have been estimated at 10% to 15% of GDP, not including efficiency losses.
 High levels of corruption that sap the energies of businesses and distort competition;
 High regulatory risks greatly reduce expected returns on investment. Risks stem from lack of
transparency and predictability in the development and application of regulations, such as during
the inspections process. Regulatory risk reduces both the quantity of investment and the value of
investment. The more uncertain and risky is the legal/administrative climate in which economic
activity occurs, the more likely it is that aggressive rent seeking and short-term profit taking will
replace longer-term investment in a competitive climate.
These regulatory problems greatly reduce the anticipated benefits of other market reforms such as
integrating into the European Single Market. They contribute to corruption and the growth of the grey
economy. The dynamic impacts are hard to measure, but international evidence is mounting that reducing
regulatory and administrative barriers to market entry has important economy-wide effects, including
accelerating multifactor productivity growth, reducing the cost of capital, boosting innovation, and
contributing to poverty reduction.
Source: Adapted from Jacobs, Cordova & Associates, 2008
Potential economic benefits are difficult
to estimate since a baseline regulatory
cost estimation has not been done, but,
if Ukraine performs like South Korea or
Vietnam in the guillotine process, could
be in the range of $1 billion/year to $1.3
billion/year, plus unquantified dynamic
effects.

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they seem ambitious but feasible. Regulation imposes high invisible costs on businesses and
consumers. In the United States, for example, national regulation is estimated to impose invisible
annual costs of nearly $2 trillion, or 14% of GDP. Costs of regulation are even more important at
the microeconomic level, due to high opportunity costs of firm-level resources. The
disproportionate negative impact of regulatory compliance costs on small and medium enterprises
(SMEs) has been repeatedly documented.5
These rough estimates of potential benefits will be revised through the reform itself as
priorities are set and the cost-savings of individual recommendations are calculated. The reform
should set a public goal of reaching at least some level of cost-savings to improve performance.
This is discussed in the section below on key performance indicators.
The relatively low ranking of Ukraine in the 2014 Economic Freedom Index (EFI),
combined with the large number of legal norms in Ukraine, suggests that Ukraine’s regulatory
challenges have some resemblance to those in South Korea. The South Korean reforms, which
eliminated half of all business regulations on the books, were assisted by direct involvement in
the reform process by the Prime Minister and President, and these lessons are incorporated into
the proposed plan for Ukraine.
Other important potential benefits of the guillotine process in Ukraine include important
dynamic effects of higher levels of investment, job creation, innovation, and productivity growth,
which are not quantitatively calculated here (see Box 2).
Improving Ukraine’s rankings on various international indicators relevant to good
regulations, such as the World Bank’s Doing Business indicators, and the EFI mentioned above,
can be a good communication channel for international investors. This reform will seek when
possible to make recommendations relevant to these indicators, keeping always in focus the
primary goal of reducing business costs as severely as possible while maintaining good
regulations needed for health, safety, and environmental protection.
There are several possible sources of other cost savings from this kind of comprehensive
regulatory reform program.
Cost-savings to the government through simplified administration. While the guillotine
process does not itself reduce public staffing, its effects are to eliminate unneeded activities and
to provide flexibility in the budget process for cost-savings. If a recommendation will produce clear
savings to government costs, the reform will assess those savings on a case by case basis.
Anti-corruption effects by reducing the complexity and discretion related to regulation.
Some guillotines have included explicit “corruption vulnerability” assessments in the review
criteria, and, given the corruption costs in Ukraine, these might be considered for the Ukraine
guillotine.
5 See for example OECD (2001): Businesses Views on Red Tape: Administrative And Regulatory
Burdens on Small and Medium-Sized Enterprises, Paris.

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Table 1. Benchmarking Ukraine: Results of Regulatory guillotine reforms in 10 countries
Type of
review Target rules
Number of
regulations
before
cleanup
% of
regulations
eliminated
% of
regulations
simplified
Economic gains if
estimated
Korea
(11 months)
Legality,
Need, Cost
Regulations 11,125 48.8% 21.7%
1,066,200 new jobs
Business cost savings: +4.4%
of GDP
$36.5 billion extra FDI over 5
years6
Mexico
(9 months)
Legality,
Need, Cost
Formalities 2,038 54% 27%
Not estimated
Kenya
(18 months)
Legality,
Need, Cost
Licenses and
fees
1,315 24% 29%
Savings to businesses
estimated at US$ 146
million/year, or .06% of GDP7
Moldova
(6 months)
Legality Regulations 1,130 44.5% 12.5% Not estimated
Legality
Fee-based
Permits
400 68% 20.3%
Not estimated
Ukraine
(12 weeks)
Legality Regulations 14,000 36% 7,2%
Not estimated
Bosnia /RS
(4 months)
Legality,
Need
Formalities 331 27% 42%
Direct savings to business
estimated at US$ 2
million/year, and indirect
savings of US$ 13
million/year8
Legality Inspections 2,473 43% 31%
Croatia
(9 months)
Legality,
Need, Cost
Business
Regulations
1,451 15% 10%
Savings of US$ 65.6
million/year. or 0.13% of
GDP9 (actually implemented)
Serbia Legality,
Need, Cost
Formalities,
including
local levels
NA NA NA
US$ 106 million (including
recommendations from local
level implemented at national
level)
Montenegro Legality,
Need, Cost
Business
Regulations
at municipal
level
NA NA NA
Municipalities only US$ 4
million if all recommendations
are implemented
Vietnam
(3 years)
Legality,
Need, Cost,
WTO impact
All
procedures at
all levels of
government
5,700 underway Underway=
Full package estimated at
$1.45 billion/year
Source: Jacobs and Associates, 2014
6
Projection, using input-output tables, as cited in Byungki Ha, 1999, Economic Effect on Regulatory
Reform in Korea, Seoul, Korea Institute for Industrial Economics and Trade.
7
Measuring Impacts: Monitoring and Evaluation of the Government of Kenya’s Business Licensing Reform. Study
conducted by Jacobs and Associates, July –October 2008 under FIAS Contract in Support of FIAS/World Bank
Group's Kenya Regulatory Performance and Capacity Building Program. Final draft report October 2008
8
http://limun.hr/en/main.aspx?id=560374&Page=1
9
An evaluation of the SCM measurements done as part of the regulatory reform work in Croatia, Final draft report,
5 June 2009, Report submitted by short term consultant Peter Bay Kirkegaard. Prepared under contract with
FIAS/World Bank Group

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b. Costs of the Guillotine
The guillotine has two main costs: short-term revenue losses and project implementation
costs.
Short-term revenue losses to government. Some regulations raise revenues for
government coffers. A common example is a fee associated with a license or a customs
procedure. When these regulations kill economic activity, they may sacrifice medium-term
revenue gains through economic growth and diversity in favor of short-term revenue targets. It is
impossible calculate in advance of the reform the potential revenue losses of recommendations.
To ensure full transparency and objectivity, the guillotine reform will calculate, for each
recommendation, the potential loss to short-term government revenue, so that decision-makers
can clearly see the revenue losses and make appropriate transitional plans. The focus of the
guillotine is on increasing government revenues through a growing and diversified market
economy. To build the environment for increases in medium-term revenues, the guillotine will
recommend elimination of those regulations that are damaging economic growth, even where
short-term government revenues might be affected.
Implementation costs. There are many uncertainties about the full cost of a
comprehensive guillotine, because at this stage
some basic workload issues are not answered.
For example, it is not yet clear how many legal
norms will be reviewed, nor the level of technical
input required. These questions will answered
after the inventory stage, and as the reviews
commence.
The strategy in this proposal is to put into
place the complete infrastructure and essential
operating procedures and staff of the guillotine
(the baseline budget), and, as the reform
progresses, to upscale or downscale labor and
skills inputs to complete the full reform. The
guillotine process, once underway, is easily up
scaled or downscaled as needed to get the work done on schedule. We have budgeted the critical
mass needed to get the process underway, and as the work clarifies the magnitude of the task,
the team should determine the exact scope of the work needed, and the capacities of the
ministries and central unit. The team should then adjust the process, the labor inputs, or other
aspects of the reform to get the work done on schedule. Methods of quickening or upscaling the
guillotine work include:
 adding more staff to the central review unit;
 supporting reviews with more expertise from outside, such as international experts;
 improving the quality or speed of business reviews;
 prioritizing reviews and spending more time on high priorities and less time on low
priorities;
 adding a few more months to the work of the existing team.
The strategy in this plan is to put into
place the complete infrastructure and
essential operating procedures and
staff of the guillotine (the baseline
budget), and, as the reform progresses,
to upscale or downscale labor and skills
inputs to complete the full reform.
A smaller 6-month “start-up” budget is
presented here to facilitate early
financing needed for a rapid launch by a
core team while procurement is
underway for the full budget.

13
Annex 2 contains the baseline proposed budget for the guillotine to put into place the
essential infrastructure, launch the process, and sustain the reform over a period of 36 months.
The guillotine process requires several kinds of inputs, summarized in Table 2 below. The largest
cost is the labor cost of Ukrainian experts in the central guillotine unit. Other inputs are itemized.
The full reform cost is likely to be around $9.98 million to review 7,000 to 10,000 legal norms in
36 months.
Table 2: Summary of baseline budget for Ukraine
% of
Total
Labor costs Ukraine $ 6,373,719.77 64.0%
Labor costs international $ 2,125,058.91 21.3%
IT and software costs $ 458,600.00 4.6%
PR costs $ 258,000.00 2.6%
Office costs $ 747,901.00 7.5%
Total $ 9,963,279.67 100%
A financing strategy will be necessary to ensure that the project is fully resourced from the
beginning so that it can proceed effectively and on schedule, and can sign contracts for staff.
Sources of financing should be mixed among the Government of Ukraine and donors, and should
be confirmed through discussions and agreement with donors on the basis of a clear project
description and budget, such as is contained in this operating plan.
A successful approach used in other countries is a multi-donor platform, in which
interested donors select “modules” in the budget, such as provision of experts for review of
specific technical areas (such as financial services or SPS regulations) or the Ukrainian staffing
in the central unit, for financing under their ongoing programs. This has allowed more rapid and
flexible financing of the various activities of the guillotine, but care should taken that financing
gaps are not created that slow down the project mid-way through. Multi-donor financing requires
good coordination, planning, and reporting capacities between Government and participating
donors.
As part of the baseline budget, this plan estimates a “start-up” budget of $1.52 million,
summarized in Table 3,that is designed to permit organization of more rapid financing on a smaller
scale. The start-up budget is not in addition to the full budget, but part of the full budget. The start-
up budget is based on transferring existing capacities and staff from Phase 1 of the national
deregulation strategy, combined with the early components of the full reform. This start-up
package is intended to permit the guillotine reform to begin putting together deregulation
packages as quickly as possible after the government has adopted the reform, and requested
that donors provide financing. As the GANTT chart in Annex 4 shows, rapid financing of the “start-
up” budget together with rapid deployment of core staff would permit the first deregulation
packages to reach the government for action within 8 to 10 weeks after financing is available.

14
Table 3: Start-up 6-Month Budget for Rapid Launch
% of
Total
Labor costs Ukraine $ 518,949.55 34.11%
Labor costs international $ 237,580.00 15.62%
IT costs $ 459,600.00 30.21%
PR costs $ - 0.00%
Office costs $ 305,300.00 20.07%
Total $ 1,521,429.55 100%
c. Risks of the Reform
A broad and rapid reform of this kind can fail if certain elements are not present. The risks
presented below are based on earlier deregulation efforts in Ukraine, such as the 2005 first
guillotine, and the experiences of other countries. The key risks are these:
 Sustained political commitment in Government might fade in the face of strong
resistance. The broad application and organization of the guillotine is intended to
reduce the conflict of reform by using a consistent and transparent process across the
whole of the government, but resistance from powerful groups inside and outside the
government is likely. It is important that even controversial issues go through the
normal guillotine process, and do not short-circuit the structure. The proposed
structure of Prime Ministerial and Minister of Economic Development and Trade
leadership in a Special Committee of Government for Deregulation with a clear legal
mandate (CMU Resolution) and active oversight from the Cabinet of Ministers is
intended to establish strong political credibility of the reform process.
 Difficulties passing the laws through the Parliament. Ukraine’s Parliament has a record
of amending draft bills in ways that reflect the needs of special interests. This risk will
be always be present in a democracy, but the program can manage the risk in a few
ways: 1) Engage Members of the Parliament in key discussions before law drafts are
submitted to the Parliament for registration; 2) Actively utilize the Council of the
Coalition as a platform to discuss drafts with MPs and achieve support on a political
level; 3) Discuss important or controversial issues in the National Reform Council to
gain the support of political parties before submission to the Parliament; and 4)
Support consideration in the Parliament of changes to the procedural rules of
Parliament to allow expedited treatment of certain kinds of legislative proposals. For
example, omnibus deregulation proposals could be given a first reading, and then go
directly to the floor for a vote either up or down, without amendment.
 Day to day leadership. The head of the guillotine unit might be unable to carry out a
credible reform, keeping both the integrity of the process and the trust of the political
leadership that the guillotine is making the right decisions. The management and
political skills of the head of the unit are critical.

15
 Staff skills in law, business affairs, and cost estimation will not be available to staff the
central unit. This is a low risk – no country that has operated the guillotine has yet
been unable to put together a capable staff for the central unit.
 Organization of business participation might be slow or ineffective. A small unit of
dedicated staff is needed to support business organization and participation. The
budget contains a small staff dedicated to civil society facilitation, whose job it will be
to help organize and build capacities in civil society organizations for their full and
constructive participation in the guillotine process.
 Ministry organization might be slow or poor quality, and ministerial resistance at mid-
levels might slow the process. The staff of the central unit will be tasked with training
and assisting the ministries to carry out their internal reviews. Resistance at mid-levels
is typical in these kinds of reforms. The guillotine process is designed specifically to
work in environments where resistance is expected. For example, the civil society
reviews in the reviews of the central guillotine unit will proceed with or without input
from the ministry. Normally, in the guillotine process some ministries cooperate more
than others, and cooperation increases as the guillotine proceeds and the credibility
and visibility of the reform increase.
5. Detailed Operational Plan
A national guillotine program rests on a series of strategic and operational decisions that
together form the design of the program. The decisions in guillotine program design are discussed
below in this operational plan, with milestones, timing, desired results, and resources and
budgeting needed to complete the guillotine successfully on schedule.
The proposed budget was discussed above and is presented in Annex 2. Government
and donors should work together to finance the reform. A mix of inputs is needed in this project,
including human resources and both Ukrainian and foreign experts, software and hardware to
support the IT strategy, resources for communications and outreach, and equipping of the office
that supports the work. This operational plan is intended to be the basis for approval by the key
political officials, development of the necessary legal text, and commitments by civil society and
donors of resources that are needed.
In operation, the guillotine is a flexible method for rapidly reviewing a large number of
regulations, and eliminating those that are no longer needed. It is a highly-organized, top-down
approach that centralizes the key decisions in a high-level review group to move fast and ensure
that ministries cannot protect unneeded regulations. The basics of the guillotine work like this:
1. The government adopts the reform at a Cabinet of Ministers Meeting, and creates a legal
framework through a resolution of the Cabinet of Ministers (CMU Resolution).
2. The government establishes the scope of the guillotine, that is, defines precisely the kinds
of regulatory instruments to be included and the regulatory bodies.
3. The government creates a central guillotine unit at the center of government that manages
the whole reform and carries out independent reviews. It also consults with the ministries
and civil society during the process.
4. An inventory of all legal norms in the scope of the guillotine completes an electronic

16
database that is used to manage the reform.
5. In the guillotine process, each regulation must be justified to the central unit as meeting
basic criteria. That is, the burden of proof is on the regulator to defend why the regulation
should be kept. Three typical criteria are: Is the regulation legal? Is the regulation
necessary for future policy needs? Is the regulation business-friendly? This review is done
by the ministries themselves, then by stakeholders, and finally the final review is done by
the central unit.
6. The final recommendations are sent by the central unit to the Government for adoption as
a single package.
7. Surviving regulations are placed into a comprehensive electronic registry that improves
legal security and transparency as it is maintained in the future. The registry can be the
basis for one stop shops combining various procedures, and can further incorporate smart
forms through a continuous process of improvement in future.
The Ukrainian guillotine follows this basic process. The key steps and timing of the
Ukrainian guillotine are listed in the Gantt chart in Annex 4, and discussed in more detail below.
a. Scope of the Reform
One of the most important decisions to be made in a broad guillotine program is the scope
of the reform across three dimensions: institutions, legal instruments, and reference groups.
Together, these dimensions define the “comprehensiveness” of the reform, which is important
particularly from the viewpoint of the regulated entity, which experiences regulatory costs and
risks as a product of the entire regulatory system. Getting the scope right is a key to successful
reform. The most effective scope is a reform that extends across all institutions and regulatory
instruments. These decisions are summarized in Table 4 and discussed below.
Table 4: Recommendations on the Scope of the Guillotine in Ukraine
International Good
Practice
Recommendation for Ukraine
Institutions: Broad
application
The scope of the guillotine is recommended as follows: almost
all ministries and regulatory agencies at national level. They
are listed in Annex 3.
One national body (State Nuclear Regulatory Inspection) is
recommended for exclusion because it regulates highly
scientific and technical areas (nuclear technology) not suited to
the guillotine process.
Legal instruments: Broad
application
The scope of the guillotine in Ukraine is recommended to cover
all levels of “legal norms” which are broadly defined as any
requirement placed on the business sector or on citizens. This
will require the ministries and agencies to validate the “Rada”
inventory of all legal norms they are enforcing, plus any legal
other normative documents issued by them as well as all other
documents including forms, official letters, notices, guidelines,
instructions and other administrative documents related to legal
norms.

17
It is unknown at this time how many legal norms of this kind
exist at the national level in Ukraine, but, based on the
databases and other countries, it is probably from 7000 to
10,000.
Reference groups: Either
businesses or citizens or
both.
The scope of the Ukrainian guillotine is recommended to cover
both effects on businesses and citizens.
Priority sectors: Set early
priorities
Reforms should be packaged into groups of recommendations,
starting with priority packages as early as 2 months into the
reform under the rapid Start-up Budget. Priority packages could
focus on:
 Deregulation proposals already considered by the Easy
Business NGO in Phase 1
 Doing Business procedures such as construction
permitting
 Annoying citizen procedures where impacts could be
easily seen.
Institutions. To produce the best results, the Ukrainian guillotine should include the list of
almost 70 institutions listed in Annex 3. A truly national reform will apply to the broadest possible
range of institutions so that businesses and citizens see maximum results. Where regulatory
systems are complex, with many layers of regulations that offer much potential for overlap and
inconsistency, operation of the reform across the entire state administration will produce the best
results, because many relevant problems occur at the interface between institutions (inconsistent
or duplicative regulations).
Legal instruments. A simplification program can operate at any level of regulation. The
Ukrainian guillotine includes the full range of legal instruments used in Ukraine including both
those with formal legal normative status and those that are used to impose requirements on the
businesses and citizens without formal legal authority. This broad scope will be clearly stated in
the instructions to ministries. Instruments included in this reform are:
Table 5: Legal Norms Included in the Scope of the Guillotine
Legal Norm Total Number of
Norms*
Codes 23
Laws 5,286
CMU Resolutions 20,863
Presidential Decrees 5,024
Decrees of Ministries 7,728
Legal acts adopted before 24.08.1991 5,317
Legal norms contained in Rada database held by Ministry of
Justice, including amendments
78,245
*These results are from the Rada database held by the Ministry of Justice. Not all of these legal norms
have normative effects on businesses or citizens. Many are not separate legal acts, but amendments to
earlier acts. Over 3,000 of the total are local government decrees. The inventory phase will identify those
included in the guillotine process and consolidate amendments.

18
This broad scope means that the inventory of regulations affecting citizens and businesses
should be comprehensive, listing all laws and all other legal norms down to the lowest possible
level (letters and instructions) for which each ministry is responsible. The reform will not cover
legal norms affecting internal management of the government or individual costs, such as an
individual licensing decision.
Reference group. Both businesses and citizens face high regulatory costs in Ukraine. The
decision in Ukraine is to include legal norms imposing requirements on both businesses and
citizens.
The proposed scope of the Ukrainian guillotine across legal instruments and reference
groups is summarized in Table 6 below:
Table 6: Scope Across Legal Instruments and Reference Groups
Laws and other legal norms
affecting:
Inventory
stage
Review
stage
Internal management of the
government
Not included Not included
Individual cases Not included Not included
Citizens in non-commercial activities
(general regulatory effect)
Yes Yes
Businesses in commercial activities
(general regulatory effect)
Yes Yes
Sectoral priorities. Once the inventory phase is well underway, and the number of
administrative procedures is better understood, the Guillotine Unit will establish priorities for
the review based on consultation with the Government, ministries, and key stakeholders.
b. Political Leadership and Role of Institutions in the Reform
International Good Practice Decision in Ukraine
The reform should be founded on clear
legal authority and commitment from
the top-levels of government, and
should be implemented quickly
through clear legal procedures.
The legal framework should be based on a resolution
issued by the Cabinet of Ministers setting up a Special
Committee of the Government on Deregulation
chaired by the Prime Minister, with Deputy Chair
Minister of Economic Development and Trade, who
will oversee the reform and work of the central
guillotine unit.
Regular progress reports will be circulated to the
Special Committee of the Government to ensure that
the reform stays on schedule.
Independent and expert Unit with clear
authority from the top of government
implements the project and reviews all
administrative procedures, in
consultation with the responsible
Responsibility for implementation of the reform should
be given to the Minister of Economic Development
and Trade, who should partner with the Guillotine Unit
with a dedicated staff (about 50 people) who will
organize the ministries, carry out technical reviews
and other aspects of the reform.

19
ministries, as well as enterprises and
the public The Guillotine Unit will coordinate with the State
Regulatory Agency to create a capacity for cost
impact assessment of the legal norms under review
A Stakeholder Advisory capacity is
needed to enable key stakeholder
groups to review legal norms and
provide recommendations for change
A multifaceted civil society consultation process
should be organized at national and regional levels
with a range of opportunities for participation,
including online reviews of legal norms, and a number
of working groups focused on reviewing and
recommending changes to bodies of technical
regulations, such as in financial services or
communications.
This plan sets out the step-by-step process of the reform. It establishes the procedures,
the constituencies, and the institutions that can be used to sustain the reform to good results. If it
is to succeed, the strategy must be deliberately planned to overcome the obstacles that have
impeded many such reforms, such as passive or active resistance by insider groups, political
fatigue and wavering commitment, lack of accountability for results, lack of expertise in the reform
area, and high administrative costs of reform.
The central institutions of this reform are the Government, the Prime Minister chairing a
Special Committee of Government on Deregulation, the Minister of Economic Development and
Trade acting as Deputy Chair of the Special Committee, and an ad hoc, expert and dedicated
Guillotine Unit attached to the Ministry of Economic Development and Trade to carry out the
technical work. They will work with almost 70 national ministries and regulatory bodies, as well as
with supportive donors, to implement the reform. These institutions are organized and their
relationships are summarized in Figure 2, which presents the 17 steps of the reform process:

20
Figure 2: Organization of the Ukrainian Guillotine
The Prime Minister should lead this reform through:
 Endorsing this operating plan;
 Supporting adoption in government of a CMU resolution setting out the legal
framework for the reform;
 Chairing a small Special Committee of the Government on Deregulation of
reform-minded leaders who will oversee the reform and approve packages of
recommendations for submission to the full government;
 Supporting deregulation packages through the Government.
The Minister of Economic Development and Trade should
 Act as Deputy Chair of the Special Committee of the Government on
Deregulation
 Take responsibility for implementation of the reform under the Ministry and issue
guidance and instructions to the other institutions participating in the reform
 Receive the packages of recommendations from the head of the Guillotine Unit for
the guillotine reform, and transmit them to the Special Committee of Government
for Deregulation for approval
 Refer important issues as appropriate to the National Reform Council for
discussion
 Oversee the work of the Guillotine Unit.

21
The Special Committee of the Government on Deregulation should:
 Under the authority of the CMU Resolution, oversee the guillotine project for the
Government;
 Issue legal normative documents to the appropriate channels that are necessary
to carry out the plan and implementing final recommendations.
 Review the packages of recommendations transmitted to it by the Minister of
Economic Development and Trade
 Receive regular progress reports from the Minister of Economic Development and
Trade, and take whatever corrective action is needed to maintain the reform on
schedule with the desired results stated by the Government
The National Reform Council should:
 Integrate key performance indicators from the guillotine reform into its oversight
and reporting activities;
 Assist with any corrective action when the guillotine falls behind schedule or behind
expected results;
 Deliberate on important or controversial issues raised by the guillotine process, as
referred to it by the Minister for Economic Development and Trade
The Guillotine Unit should staff up to about 54 fulltime people initially (see baseline
operating budget), as follows:
 The Head of the Unit would be appointed by the Minister for Economic
Development and Trade.
 The Guillotine Unit would be under the direct authority of Minister for Economic
Development and Trade, with day to day implementation by the Guillotine Unit
Head.
 The staff would be hired from outside the government to meet the specific skills
required for the task. The staff would work in a highly professional environment
focused on performance, and would be trained in the methodology of the reform.
 Expansion of the staff of the Guillotine Unit as needed and as resources become
available.
The staff of the Guillotine Unit should include a skill mix of business experts, economists,
lawyers, with a few IT and PR support experts. Its human resources and TORs for key staff are
in Annex 5. Donor resources should be used to support temporary experts in different fields under
review. In some countries, such as Croatia, business associations supplied some experts to work
with the team. They would work according to defined processes and schedules, using a staff
performance measurement system supported by the eGuillotine software.
The Guillotine Unit will perform the following tasks:
 Instruct the bodies under the scope of the CMU Resolution on the procedures
needed to comply with the Decree, and assist these bodies in complying on
schedule. Bodies covered under the CMU Resolution shall comply with these
guidelines and other guidelines issued by the Head of the Guillotine Unit;

22
 Inform the Minister of Economic Trade and Development regularly and whenever
problems arise that threaten the successful completion of the reform;
 Use the project management software (the eGuillotine) to improve the consistency,
quality, transparency, and speed of the reform;
 Carry out independent reviews of the legal norms, considering information
provided by the ministries, other state bodies, and civil society such as businesses
and the public;
 Inform and encourage input from organizations such as business groups and other
stakeholders in the review of legal norms, and hold consultative seminars,
workshops, meetings, or other forms of communication as needed to ensure
transparency in the process of the reform;
 Develop a web site to enable the public to comment on legal normative documents
and proposed changes, and develop a national plan for PR, marketing, and
communications to support a national dialogue on better regulation, including use
of social media to involve the youth of the country;
 Publish the legal norms and submissions from state agencies on the Internet on
the website of the guillotine reform, together with a description of the reform and
the opportunities for the public to provide comments, as well as recommendations
and proposed changes. The website will permit any member of the public to
provide comments and information relevant to this reform.
 Assess the economic impacts, fiscal revenue impacts and social cost-savings of
recommendations for changes;
 Develop the final recommendations and prepare the necessary draft legal
normative documents to implement those recommendations, and transmit those
recommendations and draft legal norms to the Minister of Economic Development
and Trade for transmittal to the Special Committee of Government on
Deregulation;
 Prepare the contents of the electronic database and electronic Registry for
operational status;
 Generate the legal and analytical information needed for the Guillotine Unit
reviews;
 Monitor and evaluate the process and its results, and submit periodic progress
reports to the Minister, the NRC, and involved donors;
 Monitor and evaluate the implementation of the recommendations by ministries
and agencies.
Ministries and regulatory agencies. Each ministry and regulatory agency under the
scope of the reform should, as directed by the Minister of Economic Development and Trade or
the head of the Guillotine Unit, identify each legal norm that it enforces on businesses and citizens,
regardless of the document or legal form, and shall provide each legal norm to the Guillotine Unit
in the form and on the schedule requested by the Guillotine Unit, as well as all currently valid legal
normative documents issued by the ministry or agency and all other documents containing
procedures being enforced by the ministry or agency such as official letters, notices, instructions
guidelines or other documents issued by the ministry or agency or any of its departments or sub-
departments, as well as higher level legal normative documents that the ministry or agency is
responsible to implement.
Each ministry and agency shall conduct a review of each legal norm and procedure to
determine if it is legal, necessary, and business friendly, using the checklist and criteria

23
determined by the Guillotine Unit, and shall submit the results of the review to the Guillotine Unit
in the manner and on the schedule requested by the Guillotine Unit.
To prepare its inventory and to carry out its reviews, each ministry and state agency
should:
 Identify a contact person or persons responsible for overseeing the inventory
preparation and reviews for the institution. For most ministries and agencies in
Ukraine, this is likely to be the legal department.
 Create a small group reporting to the head of the agency to oversee the
development of the inventory and reviews
 Prepare a comprehensive list of all legal norms enforced by the institution on
citizens and businesses, using the Unified State Register of Legal Acts database
of the Ministry of Justice, and the inventory form required by the Guillotine Unit;
 Collect the full text of each legal norm, form, and fee schedule, and provide these
in paper or electronic copy or both;
 Compile all currently valid legal norms issued or implemented by the ministry or
agency and all other documents containing procedures being enforced by the
ministry or agency such as official letters, notices, instructions guidelines or other
documents issued by the ministry or agency or any of its departments or sub-
departments, as well as higher level legal normative documents that the ministry
or agency is responsible to implement and keep these documents in a central
location in paper or electronic copy or both, as well as submit paper or electronic
copies thereof to the Guillotine Unit no later than the deadline provided in the
schedule;
 Prepare an inventory form for each legal norm in the standard electronic format,
and a review form;
 Submit the inventory and review forms to the Guillotine Unit as forms are
completed;
 Respond to any questions from the Guillotine Unit and supply any information that
is requested, such as statistical data and other information needed to prepare the
cost impact assessments ;
 Consult as necessary with stakeholders to carry out these task at a high level of
quality;
 Promptly implement the recommendations of the Guillotine Unit once they are
adopted.
Civil society stakeholders will be an essential part of the guillotine process. Multiple
opportunities for participation will be organized by the Guillotine Unit as appropriate to suit the
capacities and resources of the key stakeholder groups. The reforms cannot be done in isolation
inside the ministries or the Guillotine Unit, because only the affected stakeholders fully understand
the impacts and problems created by rules and procedures in day-to-day life. Participation of
business and other relevant stakeholders, including media and academia, is important for two
reasons: 1) stakeholder groups are needed to mobilize the political system for continued change.
That is, pro-reform elements of civil society must act as a pressure group for change; 2) the
business sector in particular holds unique information about regulatory impacts that will greatly
boost the impact of any reform.
The proposed budget for the Guillotine Unit contains a small group of people who will work
to facilitate civil society participation in the reform. They will brief society representatives, trained

24
them as necessary to build capacities and understanding for constructive participation in the
reform, organize opportunities for participation, and coordinate the timing and content of their
participation with the schedule of reviews by the ministries, agencies, and NGO. For example, a
series of focussed working groups will be set up to provide structured review and input for related
groups of regulations in technical areas such as SPS and mining.
Working through the appropriate channels, civil society stakeholders will work with the
Guillotine Unit to carry out three tasks:
 Cooperate directly with the Guillotine Unit (such as by setting up working groups)
to provide stakeholder comments on individual legal norms to identify problems
and assist in a high quality review;
 Monitor the overall progress of the reform and report to the Government, the
media, and the parliament on satisfaction with progress;
 Review the final recommendations for action developed by the Guillotine Unit.
 Be supported by a small group in the Guillotine Unit that will work to identify specific
contributions of civil society groups and to organize working groups and other
opportunities to provide high-quality and timely information on administrative
procedures.
Donors should be requested to support the guillotine reforms by providing technical
assistance and financial resources necessary to complete the reform. As noted, a multi-donor
platform for financing and coordinating this reform has proven to provide flexibility with respect to
both timing and to evolving needs over the course of the reform. The budget is presented in a
modular format to facilitate participation of multiple donors in various aspects of the reform.
Possible modular support can include:
 Financing the Guillotine Unit, TA, IT, and other non-Government staff inputs of
the reform, as outlined in the proposed budget in this plan;
 Providing international experience and advice to the Government and the NGO;
 Financing international or domestic experts in specific fields under review by the
Government, such as communications, finance, mining, SPS, or other areas
relevant to donor programs;
 Facilitating donor participation through, for example, a donor coordination group;
 Providing other inputs such as IT procurement and support.
c. The Process of the Reform
Figure 2 shows, as well as the main institutions, several of the steps needed to complete
the guillotine reform. The timing of these steps and many more detailed steps is shown in the
GANTT chart in Annex 4. The 22 steps contained in the guillotine process are summarized below:
Step 1. This operational plan is considered by the relevant authorities, is revised as
needed, and, once agreement is reached, is formally adopted by the Government as the basis for
phase 2 of the national deregulation strategy of Ukraine.
Step 2. If the guillotine institutions are to function effectively, there must be clear legal
authority and the roles and responsibilities of the various institutions must be authorized from the
highest level. In Ukraine, a resolution from the Cabinet of Ministers should set up the reform

25
(see draft in Annex 1), and should establish the Special Committee of the Government for
Deregulation, with Chair and Deputy Chair being the Prime Minister and the Minister for Economic
Development and Trade, respectively, and elaborate the roles and responsibilities of the various
institutions involved. The CMU Resolution should also state a clear and ambitious target for the
reform, such as 50% reduction in regulatory costs in Ukraine. Endorsement by the Prime Minister
and NRC of this operating plan will be another useful step to speed up political agreement and
enable financing commitments from donors.
Step 3. A financing strategy is developed with the supporting donors, in two phases. First,
agreement is reached on financing the rapid startup phase (maximum of 6 months), in which a
core team is hired, IT customization is done, and work begins as quickly as possible so that the
first results can be seen within 8 to 10 weeks of program launch. Second, financing is obtained
and procurement is completed for staffing and other costs for the full 36 month reform.
Step 4: The institutions are established and staffed in month 1 for the start-up phase, and
by month 6 for the full reform.
Start-up Phase (maximum of six months)
Step 5: Guillotine Unit core team begins to develop first and second packages of fast-
track and high-priority reforms for submission to the Minister of Economic Development and
Trade. These fast-track reforms are based on existing work from phase 1 of the deregulation
strategy, mature suggestions from key stakeholders, and reforms that produce highly visible
improvements, such as to Doing Business procedures. First package moves forward in 8 to 10
weeks, and the second package is 15 to 16 weeks
Step 6: Beginning the inventory work in the startup phase, the Guillotine Unit issues the
instructions and forms for the inventory phase to the ministries and regulatory agencies, and trains
them. To reduce cost, the inventory will rely to the maximum extent possible on the Unified State
Register of Legal Acts database held by the Ministry of Justice. Other databases such as the Liga
(a private database of legal acts) would be used as available and needed. The data elements in
the inventory form are intended to satisfy several information needs:
 First, each legal norm must be precisely identified as to the enforcing institution and
the instrument itself. This is because the titles of many norms are similar and other
procedures overlap or duplicate. There must be precision in order to manage each
dossier properly. As the Guillotine Unit receives the Inventory Forms, it will assign a
unique inventory number to each norm. This unique inventory number will link the
inventory to the reviews.
 Second, all amendments must be consolidated into single acts, so that reviews are
done on consolidated and up-to-date versions of legal text.
 Third, each norm must have some basic descriptive information about the nature of
the procedure, such as whether it affects businesses or citizens, or involves a license,
or has forms attached, or requires fees. This is to allow the Guillotine Unit to manage
the process and establish priorities in the review phase by identifying these kinds of
high cost norms.
 Finally, there should be a contact point for each norm in order to facilitate quality
control and the collection of further information if necessary.

26
Step 7: Customization of the software that will be used to manage the entire process
should be completed during this phase, the software should be tested and installed.
Step 8: Initial rounds of training should be completed. Three levels of training are planned
within the Ukrainian reform:
 Training for trainers in the Guillotine Unit to be provided by experienced regulatory
guillotine experts (international TA) on all aspects of the operational work starting from
the inventory phase and ending with implementation of recommendations. The
purpose of this training is to focus on quality control, and checkpoints for insuring the
quality of each submission before inventorying and starting the review. The training
establishes a prioritization system to target efforts towards maximum impact, standard
procedures for reviewing measures such as data gathering, preparing case
documentation, managing meetings with regulators and stakeholders, and assessing
and preparing opinions.
 Training for a small team in each ministry and state agency who is responsible for
delivering inventory lists and review reports for legal norms. This is to ensure the
understanding and the quality of inputs provided by state agencies in completing the
forms. Such training can be done through several training sessions of 4-6 hours.
Training groups will not be bigger than 25-30 individuals. This training is planned
before the beginning of the inventory phase and at the beginning of the review phase.
 Training for interested representatives from civil society and business groups. This is
to inform and explain to identified stakeholders the scope and objectives of the reform,
guide them through the Instructions on how to complete the reviews. This training is
organised during the inventory or at the beginning of review phase. It will be repeated
depending on interest and need throughout the reform.
Step 9: Ministries and state agencies submit inventory forms by uploading to the software.
The Guillotine Unit reviews the forms for completeness and quality, and, as needed, works with
the ministries to complete the inventory.
Step 10: Guillotine Unit completes the electronic inventory, and makes the entire database
available online for public access, searching and comment. This allows, for the first time, a clear
estimation of the legal norms included in the scope of the guillotine and creates a management
database that is used for the entire reform.
Step 11: Communication and consultation strategy begins to inform civil society of the
database that is now accessible to them, and of the plans to carry out a full review of the legal
norms. Website is established. A list of key stakeholders is begun, and discussions with them
begin on strategies for ensuring their full knowledge of the reform process, and on modalities of
participation.
Step 12: Based on the completed inventory, two important management decisions are
taken: 1) the full schedule of reviews is determined, covering all items of the database and all
ministries and state agencies in the scope of the reform, and considering priorities of the
Government for faster action in some areas; 2) a review is done of the budget and work program
considering the final count of norms in the inventory, and the workload needed to complete the
reform. Recommendations in these two areas are sent to the Minister for Economic Development
and Trade, for transmission to the Special Committee of Government for Deregulation for its
approval.

27
Full review phase (up to 36 months)
Step 13: The guillotine reviews are precisely targeted and structured to identify unneeded
regulatory costs and risks, while ensuring that needed health, safety, environment, worker
protections, and SPS regulations are maintained and, as appropriate, aligned with EU standards.
Either in the start-up phase or the full phase, the review process will begin with
development of the standardized review method. To reduce subjectivity and to provide a
consistent approach to reviewing the quality of legal texts, it is important that a transparent and
scientific basis for the review be established. Based on principles from microeconomics, the rule
of law, and new public management, the actual review form should be created in the form of
simple checklist that can be filled out by every regulator and stakeholder for each regulation under
review. The draft checklist should be thoroughly reviewed, discussed, and piloted by experts
before being submitted to the Special Committee of Government for Deregulation for approval.
The review checklist normally organizes the review criteria into three sections that ask a series of
highly focused questions:
1) Is the legal norm legal?
The questions to check legality are extremely important for the success of the
review. If a norm is found not to be legal, it will be recommended for elimination. Lack of
legality can be in many circumstances, such as inconsistency between legal norms, lack
of authorization by higher legal norms, violation of trade commitments, or violation of
publication requirements. This review will be coordinated with the Ministry of Justice in
cleaning out the so-called “dead legal acts” and identifying overlap and duplication in
legal norms.
2) Is the legal norm needed?
If a legal norm is not needed, it will be recommended for elimination. This is the
most difficult of the criteria, yet is extremely important because many of the regulations
on the books in Ukraine represent market interventions that are unnecessary or
damaging in the current market development strategy. In this section, the typical
guillotine checklist asks several questions, drawn from principles of good regulation and
economic freedom, that attempt to separate legal norms with unnecessary or damaging
purposes, such as control of the market or inappropriate intervention into commercial
decisions, from those with genuine public policy purposes such as protection of human
health or the environment.
3) Is the legal norm business friendly and are risks of corruption minimized?
If a rule or procedure is found to be both legal and needed, but not business
friendly, the result will be a recommendation from the Guillotine Unit for simplification.
There are many ways of measuring business friendliness. The questions in the checklist
normally select a few simple standards for business costs, such as the length of time
that a license is valid, the duplication of information, and the use of ex ante rather than
ex poste requirements. It will be important, given the large number of norms in Ukraine,
to identify those norms that have contradictions with other legal norms.

28
To customize the process to Ukraine, we propose to add a phase of the review aimed at
identifying relevant SPS and animal welfare legislation under the DCFTA, and supporting the
process of approximation to EU standards. In this phase, relevant Ukrainian legislation will be
identified, flagged, and reviewed by competent legal experts as part of the process of developing
recommendations.
We also propose including in this section questions on corruption vulnerability, using
methods developed in Italy and Russia by legal experts to detect where legal text allows undue
discretion in application, and where lack of clarity or where other opportunities for corruption might
arise.
Step 14: Once the checklist is finalized, the Guillotine Unit will issue online review forms
based on the checklist, and trains ministries and state agencies in how to conduct the reviews.
Training in application of the evaluation criteria is necessary at both the level of the central unit
and in ministries.
Step 15: Using the schedule of reviews agreed by the special committee of government
for deregulation, Ministries and state agencies submit reviews to the Guillotine Unit. This is
staggered, so early priority areas are reviewed first, followed by other reviews through the entire
reform process.
Step 16: Simultaneously, civil society and business groups carry out their own reviews
and submit their recommendations. This is staggered as well to accelerate priority areas.
Step 17: As reviews by ministries and civil society are completed, the Guillotine Unit
carries out its own reviews, which are timed to complete each package of recommendations on
schedule. For each recommendation, the Guillotine Unit estimates the impacts on tax revenues
and business/citizen cost savings (discussed below).
Step 18: As each package is completed, the Guillotine Unit will send it forward to the
Minister of Economic Development and Trade, for his submission to the Special Committee of
Government on Deregulation. The Minister or Special Committee will decide if specific issues are
to be discussed by the National Reform Council to prepare them for submission to the
government, or if further consultation is needed with ministries and state agencies. The Special
Committee will review and prepare the package, when it is ready, for submission to the full
Government.
Step 19: Quantitative performance targets will be reported for each package and
compared to the targets and goals of the Government for this reform. These indicators are also
reported to the National Reform Council for integration into its performance monitoring and
reporting to the Government, the Parliament, the President, and civil society.
Step 20: As decisions are made by the Special Committee and the Government, the
Guillotine Unit drafts or amends legal text as needed to implement the recommendations and
assembles the final package.

29
Step 21: Once agreed by the full Government, the recommendations that affect changes
to law will be packaged into omnibus legal packages and transmitted to the Parliament for action.
Step 22: Guillotine Unit monitors adoption and implementation, registers full
implementation in the performance indicators, and reports to the Minister for Economic
Development and Trade.
A further step, not included in the guillotine reform itself but which is part of the follow up
sustainability reforms, is use of the guillotine database to create an online, user-friendly electronic
registry of all legal norms and procedures, with positive legal security, so that businesses can rely
on a central information source for all legal obligations. This registry can be elaborated to provide
a range of business services, such as online forms, smart forms, tracking processes for
applications, online submission of data, and so forth. It can also be linked to a central government
portal for stakeholder consultation.
d. Use of IT Management Software
The management and consultation of thousands of different dossiers across many
different institutions is more efficient, faster, more transparent, more accessible and better
structured with IT tools. The most successful guillotine projects, such as Vietnam and Armenia,
have used increasingly sophisticated document-collaboration-process management software
specifically designed for the regulatory guillotine. To develop the reliable infrastructure and IT
tools needed for efficient and transparent implementation of projects based on the regulatory
guillotine principles, an IT strategy is needed. The proposed budget contains financing for the
project management software, based on the open-source software system used in Vietnam,
Egypt, Armenia, Croatia and now Kyrgyzstan.
The aim of the IT strategy should be to:
 Provide information and functional specification of an effective electronic tool for
managing the documents, processes and public access in all phases of the regulatory
guillotine project
 Improve communications, engagement and facilitate collaboration between the
government, stakeholders, businesses and civil society i.e. general public.
 Promote transparency and inclusion of stakeholders and interested parties (e.g. donor
community, international organizations) in all aspects of the regulatory guillotine project,
 Ensure that all IT hardware and software needs are addressed and optimized for their
best use within the guillotine project.
 Enable management of the project by the Guillotine Unit and others to monitor
performance and manage the process.
The IT strategy should in a simple but structured way assist the project’s implementation
unit’s staff to process, manage and archive documents (e.g. legal documents, administrative
procedures) in electronic form and securely accessible. To assist procurement of the IT tools, the
important specifications are set out below. The software supporting the IT strategy should:
 prevent unnecessary duplication of tasks of project staff and teams
 protect the integrity and security of the network, the connected systems and the stored
data

30
 manage roles and responsibilities within the project primary stakeholders (e.g. secure
access for different with selected view, edit or manage rights)
 make the best use of expertise and resources
 foster collaboration among the project, government and public by creating the direct
feedback mechanism and Internet visibility of the project
 ensure full transparency of the different information collected in the project
 simplify the interfaces for internal processes of tasks and document management
 enable responsive / adoptive graphical user interface automatically adjusted for any
operating system, browser, or device (e.g. smartphones, tablet computers, MAC or PCs)
 simplify the interfaces for communication
 promote state of the art IT solution and best international practice
 provide staff and management of the project with secure access to collected information
and other resources for which they have authorization, at any time and regardless of
where they happen to be
 enable simple expansion abilities i.e. further development of software functionalities
 provide open-source source code with no need for purchase additional expensive server
or client licenses,
 simple and fast use with no need for any software installation on client computer
devices.
The IT Strategy is a set of guidelines for the development and use of IT solutions and tools
covering:
 Hardware and software (database) components for the processing, storage and
transmission of documents for inventory and review project phases from different
sources
 Operating system and additional tools needed
 How applications such can be built on these components
 Information security and the other elements which turn systems into services (such as
documentation and training).
The guidelines should include following tasks and activities needed for development of the
appropriate IT infrastructure and environment for use of an effective application:
 Planning central systems to ensure compatibility and integration with other systems i.e.
database server and application server
 Defining location of the database
 Ensure maintenance of the database throughout the project life and beyond
 Ensure funds for the hardware and database
 Develop standards and rationalization to avoid duplication of tasks
 Train staff in the implementation unit and other primary stakeholder groups regarding the
use of the software
 Establishing a central server for internal documentations with appropriate folder
structure.
A good management software should provide a structured approach to the inventory and
review process used in regulatory guillotine methodology, with traceability to public comments
and statistical analysis, versioning, and create the platform for a public web-based fully functional
electronic registry of legal documents (and administrative procedures, if required). It is important

31
to ensure increased legal, judicial and administrative transparency of the project and establish
the two-way communication channel for broader public through development of a state-of-the art
open source, web-based internet portal. This portal should be used to manage the process,
document citizen and business proposals/complaints, and inventory all administrative procedures
in the project scope.
By using a structured database and processes for this reform, resources will be optimally
used and operations costs will be significantly reduced as well. IT solutions for regulatory guillotine
should be able to ensure timely monitoring of performance and progress.
e. National Target for Cost Cutting, Cost Impact Assessment, Key
Performance Indicators in the National Guillotine, and the Role of
the National Reform Council
If it is to change behavior of businesses operating in competitive markets, the guillotine
reform must be economically relevant. Economic relevance means, in this case, that the costs
and risks of doing business in Ukraine must change substantially, concretely, and visibly. Such
changes should set in motion a series of positive changes in the micro economy such as
increased investment, increased risk-taking, and increased innovation.
In the 2005 Ukraine guillotine, there was no clear performance indicators for the reviews,
which accounts partly for the disappointing results. Some countries have set performance
standards based on number of rules eliminated, such as eliminating 30% of current regulations.
However, number of regulations eliminated has no relevance to economic results, as it is easy to
delete “dead” or trivial regulations that have no real impact on business life. Economically relevant
impacts are those that directly affect the market, such as costs, risks, or reduction of barriers to
entry, and the guillotine reform should be continually focused on those economically relevant
targets.
Phase 2 of the 2015 Ukraine deregulation strategy needs more relevant and clear
indicators for measurement purposes. Clearer monitoring is needed for three reasons:
 To enable performance management of the review teams in ministries and the
Guillotine Unit and to identify where teams were falling short of the target;
 To communicate performance of the ministries and the Guillotine Unit to the
Government and civil society;
 To communicate results to donors and others providing resources for the work.
It has been found in guillotines around the world that clear performance targets greatly
facilitate and speed up the reform work. Recent guillotines have adopted quantitative targets
based on cost cutting. For example, the Armenian government stated, at the beginning of its
guillotine process: “The goal of the reform is to cut the costs of doing business and services
provided by the GoA in Armenia by at least 50%”, which should set into motion a series of
beneficial, pro-growth reactions in the business and investment communities that will contribute
to overall growth. A number of other key performance indicators are used to report the results of
the Armenia guillotine to the political level are shown in Box 2 below.
It is recommended here that Ukraine adopt a similar approach by setting a quantitative
performance target that can be used to determine performance across the entire reform and also

32
the performance of individual institutions involved in the reform. The 50% reduction in costs facing
businesses in Armenia seems equally relevant to Ukraine, and hence the 50% cost reduction
target is recommended.
Adopting a quantitative target requires a low-cost but reliable quantitative methodology for
measurement of baseline and reform costs. A simple yet rigorous cost impact assessment method
was developed, tested, refined, and applied in Armenia to ensure that the performance indicators
of reductions in business costs were based on sound analysis. The intent of the method was to
capture real costs, and therefore cost estimation should be based on good consultation practices
with stakeholders. This method could be applied in Ukraine as well. It is based on three
quantitative measures of different components of regulatory cost (operating costs, capital costs,
and opportunity costs), and a qualitative measure of barriers to economic freedom. Likewise,
impacts on tax revenues must be estimated. Such impacts can be either negative or positive.
Direct negative impacts can result from simplification such as of customs procedures. Positive
impacts can also be seen. For example, taxes not collected at the border are passed through in
the form of higher business profits, and collected as income taxes.
Whatever method it used, it is important that a standardized method be developed and
tested to ensure that all performance indicators are consistently and reliably developed during the
life of this project.
This work requires dedicated capacity in the Guillotine Unit. The recommended budget
includes staffing a Cost Impact Assessment Team in the Guillotine Unit. Its work will be crucial to
the work of the entire unit, since the performance of the entire project is cost based. It will be
important to coordinate and share the cost impact assessment work with the 15-person RIA team
based in the State Regulatory Agency. Ukraine does not need to separate cost impact
assessment methods, with two sets of manuals and two sets of trainings. The method used by
the RIA team and the method used by the guillotine team should be harmonized so that capacities
are built that can be used after the guillotine is completed. We would recommend that the
Guillotine Unit seek opportunities to use its resources to build capacities in the State Regulatory
Agency RIA unit.
It is also useful to include both the baseline and reform costs in the project management
software, so that cost reductions can be calculated for every legal norm, procedure, ministry or
state agency, and Guillotine Unit reviewer, at the push of a button. This allows detailed scrutiny
of performance across a wide range of participants in the reform.
Independent reporting of performance can be a useful way to improve accountability and
transparency. Of course, the guillotine process can be facilitated by regular progress reports from
the Guillotine Unit to the Minister for Economic Development and Trade, the Special Committee
of the Government for Deregulation, the Government, and the Parliament, so that when the
recommendations are finally presented, there is a clear understanding of their purpose and
importance. But more is needed. Ukraine’s National Reform Council is building up a set of key
performance indicators for various reforms underway across the government. It would be useful
to integrate the key performance indicators developed for the guillotine project in the monitoring
and reporting activities of the NRC. This team has met with members of the NRC, and there
seems to be openness to this approach.

Final draft operational plan ukraine guillotine

Final draft operational plan ukraine guillotine

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