Improving the Business Climate in Swaziland

Business Licensing The Case of Mauritius

Session 4:
Business Licensing: How to Overcome the Obstacle Race

Heerun Ghurburrun
Wednesday 30 May 2012 Royal Swazi, Swaziland R R

Senior Expert ARCA Consortium

heerun@gmail.com

FIAS Investment climate survey in 2005

Size EPZ Yes No Small Medium Large Ownership Foreign Domestic 11% 85% 42% 22% 35% Exporter Yes No 37% 40% 20% 59% Year operations began in Mauritius 23% 34% 15% 12% 11% 1994-2004 1984-1995 1974-1985 1964-1984 Before 1964

Manager interviews in 285 firms (2005) Worker interviews with 927 individuals (2005)
Complemented by Investment Climate data from 31 other countries, Doing Business indicators, World Development Report, Mauritius CSO

Constraints to Business

Managers ranked top constraints

Cost of financing Business licensing and operating permits Procedures to start a new business Skills and education of available workers Macroeconomic instability Anti-competitive or informal practices Corruption Access to Finance Labor regulations Tax rates Price controls & inflations Crime, theft and disorder Regulatory policy uncertainty Legal framework/conflict resolution Customs and trade regulations Access to land Tax administration Foreign Exchange regulations Transportation Electricity Environmental Regulations Sanitary, Hygiene, Security, Fire regulations Certifications (e.g. ISO) & Int'l Standards Telecommunications
0%

Percent of managers ranking each a constraint

10%

20%

30%

40%

50%

Improving the Business Climate in Swaziland - Session 4: Business Licensing 3 30/05/2012 Source: Investment Climate survey, 2005

Firm perspective of most important constraints

Cost of finance

usiness licensing and permits

Procedures to start a business

Top 5 perceived constraints:

Finance Red tape Worker skills Macro Corruption

kills and education of workers Macro instability Informal practices Corruption Access to finance
0% 10% 20% 30% 40% 50%

Percent of firms ranking each item a constraint

Improving the Business Climate in Swaziland - Session 4: Business Licensing 4 30/05/2012

Step 1 Listing all existing business licenses Step 2 Mapping each business license process

Business Licensing @ 2005 in Mauritius, before the reforms

Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

License to Kill (business)

P b l i c U t li i t e s , 6 u i P b l i c In f ra s t ru c t ur e , u L a n d T ran s p o rt & S ihp p i n g , 7 L o c a l G o v e r n m e n t ,3 T u r is m , L e is u r e a n d o E tx er n a l C o m m u n ic a t o n s , 4 5 i L b o , u I r, 6 a S c i a l S c u r i t y, , 5 o e P M , 11 O W o m e n s R ig h t s, 4 A g r o In d u s t ry & F ihs r i es , 9 e 4 A r t s & C u lt ur e , 4

E ucat on and H um an d i R se o u r ce s , 2 4

IT & T e le c o m m u n i c a t o n , i 1 0 0

E v ir o n m e n t a n d n N a t o n a l D e v e lo p m e n t i U n i t ,7 9

Regulatory Bodies: 65 - 487 licences

In d u s t ry , 1 1 H u s in g a n d L a n d s , 2 o H e a lt h a n d Q u a lit yo f L i f e, 3 8 F o r e i g n A f f iar s , 3 , F i n a n c e a n d E oc n o m i c D e v e l o p m e n t ,9 0

Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

Step 3 Setting the business licensing reform principles and agenda

Business Climate Reforms in Mauritius Fundamental Principles

Eliminate, Repeal, Abolish

Eliminate incentive-based investment schemes or special regimes (eg. EPZ) Tax and fiscal policies reforms Eliminate obsolete or useless permits, licences or other clearances Repeal and abolish outdated or inadapted laws and policies Relinquish ministerial discretionary powers as far possible: rule-based system Immigration policies Work and Residence permits policies Property acquisition by non-citizens policies Building and Development permits policies Environmental Impact permit policies
Application of the Move data, not people principle Computerisation & Automation Application of the ex-post control principle Allow to start and then check for compliance Application of the Self-adherence to Guidelines principle Onus on the business operator to comply to rules & regulations Application of the Silent Agreement principle Onus on public officers to deliver on time
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Review, Rationalise, Reengineer and Simplify

Integrate and Innovate

Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

Step 4 Implement the business licensing reform agenda

A New Business Licensing Environment Before Today

Work Permit Residence Permit Building Permit Development Permit Trade License Ministry of Labour Prime Ministers Off Local Authority Local Authority Local Authority Merged into one Occupation Permit Passport & Immigration Office thru BOI

Merged into one Local Authority Building & Land Use Permit Abolished & replaced by a trade fee 21 abolished; investment registration

Investment Certificates Board of Investment (23) Business Visa Immigration

Move from an approval system to a registration system

From return ticket Immigration date to std 2 weeks

Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

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Board of Investment Investment Promotion Act

The BOI shall act as the single interface with all investors and liaise with relevant authorities for the granting of permits Any registered investor or self-employed person may request the Board of Investment to provide assistance, support, coordination and cooperation with public sector agencies to facilitate and implement his project or business. The Board of Investment

may give such directions as may be required to expedite the processing of applications, to relevant public sector agencies in accordance with relevant guidelines; shall ensure that any application made for a permit or authorisation is processed within the time limit set by the public sector agency; may convene committees and meetings with public sector agencies to facilitate and coordinate the implementation of projects by registered investors
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Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

Business Licensing Best Practices

Business Licensing

Good business licensing is a means to fulfill legimate regulatory purposes, for example:

To safeguard public interest: health and safety To protect the environment To protect the country: National security To protect limited resources

Business licensing should not be used to manage competition in the economy or to generate revenue

Reduce transparency and increase opportunities for corruption

Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

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Licensing: A balancing act

A bad licensing regime can be:

a serious constraint to business and private sector development a severe factor undermining a countrys overall competitiveness and attractiveness

The challenge is to strike the right balance in business licensing:

What to license? Why license? How to license?

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Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

Business Licensing Reform Processlicences, permits, clearances List all existing

For each one:

Identify the name of the license or permit Determine the licensing agency or authority Map the overall licensing process Determine the requirements: inputs, frequency, time taken, cost

Test each license against the following criteria:

Is the license legal? What is the corresponding legislation? Does it advance an appropriate envvironmental, health or safety objective? What is the real purpose of the license? Why does it exist? Is this license the most efficient way to achieve the required objective or purpose? Can time limits be imposed for government responses? Can the silence is consent rule be applied?
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Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

Reform approach

Determine which licenses can be eliminated / cancelled / abolished at the very outset For the remaining ones, determine which licenses can be amalgamated with other licenses Finally for each remaining license: Review, Reengineer, Simplify and Computerise (where possible) the licensing process

Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

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Online License Catalogs (E registries) is a comprehensive list of all A license catalog

licenses in effect.

Comprehensive license catalogs include vital information on each license, including:

The law that makes the license legal The activities the license applies to The documents one must complete to acquire the license The location where one may apply for the license Costs associated with the license The maximum number of days for processing of license applications.
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Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

Benefits of Online license catalogs: eregistries

Increased regulatory transparency.

E-registries ensure that entrepreneurs caneasily identify the licenses they are required to obtain, the documents they must submit to obtain them, and the costs they must pay for them. They also reduce opportunities for corruption, as they clearly indicate the fees and documents that authorities may legally ask entrepreneurs to submit. The act of cataloguing licenses and licensing procedures in a single registry exposes redundant licenses as well as sources of red tape, such as unnecessarily burdensome demands for document submissions. The e-registry itself may thus serve as a point of departure for further reformsand a visible way to chart progress of reforms already underway.
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Creation of a platform for future licensing reform

Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

Legal considerations

Is the purpose of the law clearly stated? Does the law state who is subject to it (e.g., Businesses, physical persons)? Does the law contain all necessary definitions (e.g., definitions of license, licensing, licensing bodies, violation, etc.)? Does the law state the objectives of licensing (e.g., a limited list of legitimate regulatory purposes)? Does the law provide an exhaustive list of documents required for each license? Does the law specify limits for the amount of time agencies may take to process applications? Does the law establish the silence is consent principle? Does the law clearly indicate the cost of each license? What are the rights and duties of the licensing authorities? What are the rights and duties of an applicant?
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Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

Legal Reforms

Do we need to make legislative changes to achieve our reform purposes, or can we achieve them via other means? (e.g., changes to administrative procedures within the scope of current laws) If legal changes are necessary, can we amend current laws or do we need to create new ones? If we must amend old laws, what specific amendments must we make? If we will write a new law, what should its components be?

Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

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One-Stop Shop

A One-Stop-Shop (OSS) is a single location physical or virtual where entrepreneurs can easily complete business formalities. Important to consider whether to set up a onestop shop or not If yes, then need to determine:

the type of OSS which would be more appropriate where to set up the OSS Whether a specific legal framework (or legal amendment) is required to empower the OSS
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Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

One OSS as Single Application Point of OSS serves as the governments single This type

application point for all licenses or as the single application point for all business formalities.
Applicant submits application at OSS OSS forwards applications to licensing bodies for review Licensing bodies return approvals to OSS (or send directly to applicants) OSS returns approvals to applicants.

The model makes formalities simple for entrepreneurs, but it demands high levels of coordination among agencies. This model would be most appropriate for countries where agencies have already shown a propensity to cooperate.
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Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

One OSS: All under one roof

This type of OSS will be a physical area where all the relevant licensing bodies are present, as well as other agencies dealing with business formalities The applicant can go at one address and have all the necessary business services under roof For this model to be successful, it demands that the officers of the various agencies present at the OSS are fully empowered to take, process and determine all applications submitted. In certain countries, this type of OSS is located on the premises of the national IPA. This can pose an issue of line of reporting or of lack of cooperation.
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Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

OSS Issues

Many observers have noted that one-stop shops often work better in theory than in practice. They are often plagued by struggles over bureaucratic turf, civil servants resistance to change, and poor interagency coordination. In such circumstances, the One-Stop Shop simply becomes One More Stop. Careful consideration should be given to whether the circumstances in their countries favor the use of OSSs.

Are mechanisms for interagency coordination good, or have agency personnel shown a willingness to make them so? Who would be likely to oppose OSSs, and how strongly would they oppose them?

One might determine that OSSs are likely to create more costs than benefits in a given countrys circumstances.
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Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

Conclusion

Business licensing is a prominent barrier to doing business in many countries. The evidence is clear that over-regulation and red tape are associated with lower levels of income, lower levels of productivity, higher levels of informality, and higher levels of corruption. As licensing is a key potential bottleneck in the business start-up process, the gains from licensing reform stand to be significant.
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Improving the Business Climate in Swaziland - Session 4: Business Licensing 30/05/2012

Improving the Business Climate in Swaziland

Business Licensing The Case of Mauritius
T

THANK YOU
Heerun Ghurburrun
heerun@gmail.com