New USAID-Supported Legislation in Moldova Cuts Business Regulations
Business in Moldova may have reached a breakthrough moment when a new law on reviewing and streamlining business regulations, developed with substantial input from USAID and Bizpro/Moldova, became effective on February 6, 2005. The Moldovan Parliament passed the law on December 16, 2004 and President Vladimir Voronin signed it on December 28, 2004.
“Though the proof will be in the application of the legislation, I see this as a major benchmark in the reform process. It is very encouraging that the president of Moldova has publicly discussed the ‘guillotine process’ more than once as an example of how he is moving to reduce corruption,” explained John Starnes, USAID country program officer.
The impact of the new legislation appears to have been immediate. A day after the law went into effect, a Moldovan deputy minister of Economy said that his ministry had already identified some 350 normative documents to be annulled in line with the law. He also estimated that a full review of Moldovan laws and regulations would take seven months.
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| The Moldovan Parliament considers legislation |
The new legislation provides for the implementation of an innovative procedure at all levels of government to cut ambiguous, repetitive and ineffective business regulations that encumber investment and enterprise development. The groundbreaking tool, known as the “guillotine approach,” calls for the entire spectrum of laws that relate to business to be reviewed systematically. Laws that are deemed unnecessary after review by an expert committee guided by outside input are to be lopped off the legal books.
Eastern European countries in transition face an enormous task in reviewing and updating the Soviet-era legacy of burdensome laws, rules and other instruments dating back decades. Moldova has an extensive problem with excessive business regulations that make fertile ground for bribery and generate added costs for entrepreneurs. For more than a decade, efforts were made by Government officials to remedy the situation to no avail. No matter how well they were designed, all failed to achieve much progress and meet business community needs.
However, in February 2004, two reform-minded Moldovan government officials, the Minister of Economy and the Minister of Finance, initiated the most serious effort to date to make business regulations more investor friendly with a goal of incorporating best international practices. The effort was helped by a report submitted by Bizpro/Moldova, a USAID implementing partner that first introduced the concept of the guillotine approach as a quick way to eliminate outdated and outmoded regulations in keeping with current best international practices.
“This legislation is the outcome of the joint efforts of reformist elements within the government of Moldova and the leaders within the private sector to streamline the registration process for businesses, to reduce reporting requirements, and to eliminate unwarranted ‘inspections’ by corrupt regulators,” Starnes explained.
The approach involves developing a set of filters, beginning with a joint public/private committee vested with authority to issue rulings on the validity of existing regulations. The process involves allowing for feedback from interested individuals and organizations to determine whether specific laws and regulations should be eliminated from the legal books. Interests are shared because both the public and private sectors have much to gain from a better business environment.
The law that came into effect on February 6 formalizes the regulatory reform effort and defines a schedule, whereby only those regulations, whether reform-minded or grandfathered, that have survived the filtering process remain valid. Those that do not make it through the filtering process become history.
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