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01.11.2010, Investment Climate Program of IFC in Mongolia, Mrs. Jigjidmaa Dugeree

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Mrs. Jigjidmaa Dugeree, Local Coordinator of IFC-Funded Mongolian Business Inspection Reform Project, IFC

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01.11.2010, Investment Climate Program of IFC in Mongolia, Mrs. Jigjidmaa Dugeree

  1. 1. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Investment climate program of IFC in Mongolia IFC Mongolia Business Inspections Reform Project BCM meeting November 1, 2010 Ulaanbaatar, Mongolia
  2. 2. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency IFC Advisory work IFC Advisory services provide advice, problem solving, and training to companies, industries and governments Funding – donors, IFC, and client contributions For 2010 financial year - $268 million (61% to IDA countries) AS has 4 business lines: Access to Finance, PPP, Sustainable business and Investment Climate 2
  3. 3. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency The goal of the project: improve investment climate by reducing regulatory burden Project started in May 2009 Counterpart is GoM represented by DPM Main two components of the project: - Business inspections reform - Permit reform (was added in July, 2010) Estimated impact - $ 4 millions in savings by end of 2012 3
  4. 4. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Business inspections reform component Steering committee chaired by DPM GASI is the main client Milestones of the project: - completion of the baseline survey (report is to be published) - amendments to the State inspection law were passed in July 2010 4
  5. 5. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Business inspections reform component Survey findings: - Law on state inspections gives excessive discretional power to inspectors - Inspections are burdensome: average company spends $195 on labor cost and fines, total annual cost is $3.7 millions, annual compliance cost is $15.5 million - Inspection coverage is high (58 % of all businesses in Mongolia) but not effective (index of digestive diseases is 2.5 times higher comparing to Uzbekistan where percentage of coverage is 20) - Inspections focus on fine collections rather than on assisting businesses to increase compliance - Inspections are conducted neither in transparent nor in consistent way, subjective opinion is prevailed - Inspections are not risk based, requirements are far from risk focus - Overlapping of different inspection types (within GASI and between different gov’t organizations - Capacities and skills of inspectors are low 5
  6. 6. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Business inspections reform component Main recommendations: - Inspections should be based on risk assessments, and check lists should be introduced - Set clear procedures for conducting inspections - Eliminate inspections that overlapping and do not have any value on minimizing risk and hazards to health, public and environmental safety - Decrease discretion of inspectors in setting administrative sanctions - Make information on compliance to businesses easy to access, understandable - Consider compliance requirements from health and safety protection point of view - Amend laws and regulations based on these recommendations 6
  7. 7. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Business inspections reform component Amendments to the law on inspections: IFC proposed amendments based on international best practices - Inspections will be planed on risk base, three categories of risks: high, medium, low - Inspections will use check lists - Inspections process of conduct is clearly set - Sample and lab test costs are covered by GASI (except border inspections) if results are within norms - Inspectorates are not responsible for contribution to the state budget: MoF should not give them annual plans on fine collection - Rewarding for erasing irregularities and increasing compliance – if entities eliminate irregularities before deadline for paying fines, the amount of fines can be reduced, or even the decision on this sanction can be revised - Results of inspections will be publicly announced 7
  8. 8. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Business inspections reform component Current focus and activities of the project: - Focus on streamlining inspections on food safety - Capacity building and knowledge sharing: organized and delivered several training sessions (domestically and abroad) on risk evaluations, check lists and food safety –main message: increase compliance by giving advice and necessary information, decrease sanctions and policing - Consultations on check list developments and pilot testing at companies facilities - Providing advice on risk based planning, defining roles of each inspection types 8
  9. 9. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Business inspections reform component Plans for nearest future: - Public announcement of the survey report findings and recommendations - Assist in finalization of check lists of food producers such as meat and dairy processing, catering and selling businesses - Deliver trainings on use of check lists during inspections for inspectors and private sectors - Provide further assistance and advice on regulatory issues 9
  10. 10. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Permit reform component: facts IFC proposed Guillotine approach: tight deadlines, permits that are not on the final list are considered invalid PM resolution dated June 30, 2010 Conference on permit reform, July 1, 2010 Development of process of inventory and submission forms for permits and legal acts – inventory list Training on inventory stage, August 23-27, 2010 (173 gov’t officials attended) Development of analysis process and forms Training on analysis stage, October 12-15, 2010 (117 gov’t officials, 17 business representatives) Government Working Group – hold meetings twice 10
  11. 11. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Permit reform component Issues and problems: Good political will – but strong resistance from mid and low level gov’t officials (in some cases even from high ranking officials) Losing focus on relieving regulatory burden for businesses: delegating authority over permit from gov’t to NGO’s and third parties without first considering the necessity of the regulation and permits Bringing private sector views and recommendations into the reform process is going slower than anticipated Technical skills need to be developed faster 11
  12. 12. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Investment climate program in Mongolia IFC AS is open to discuss private sector views and proposals on the project work to make it more effective. Please contact us: by phone: 976-11-312694 by email: jdugeree@ifc.org, hshrader@ifc.org Or visit us: MCS Plaza building, 4th floor, IFC office Thank you! 12

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