Presentation by James Emery Regional Economist for Africa International Finance Corporation

1
Presentation by James EmeryRegional Economist
for Africa International Finance Corporation
Challenges Faced in Removing Administrative
Barriers to FDI

• FIAS Seminar on FDI Issues Recent Knowledge
  Gains
• June 25, 1999

2
METHODOLOGY AND SCOPE

• Documentation of all procedures, licenses,
  requirements
• Steps
• Institutions
• Delays
• Costs
• Assessment and recommendations
• Workshop and dissemination
• Implementation

3
METHODOLOGY AND SCOPE

• Perspective of firm/investor
• Regulations, and how they are implemented
• Organization follows investment process
• General approvals
• Sectoral licensing
• Land, site development and utilities
• Operational requirements
• FIAS experience to date
• Ghana, Namibia, Mozambique, Uganda, Swaziland,
  Lesotho, Mali, Madagascar, Senegal, Mauritania,
  Zimbabwe, Jordan, Latvia, Lithuania, Bolivia

4
WHY ADMINISTRATIVE BARRIERS?

• Reform, adjustment and liberalization in place or
  underway
• Lack of private investment response
• Investment climate still problematic
• Need for vehicle to examine investment climate in
  a comprehensive fashion
• Not a fundamental determinant of investment, but
  still a negative factor

5
SYMPTOMS OF ADMINISTRATIVE BARRIERS

• Rigid and pervasive barriers between formal and
  informal sectors
• Lack of 100 percent foreign investment
• Low realization rates for projects
• Emphasis on screening and restriction of entry as
  regulatory tools, rather than monitoring and
  enforcement
• Corruption
• Poor government-private sector relations

6
EFFECTS ON INVESTMENT CLIMATE

• Increased business costs
• Delays
• Managerial time
• Bribes
• Uncertainty
• Scares off prospective investors distorts
  project structures
• Complexity means any business is always in
  violation of some law or regulation
• Businesses exposed to capricious enforcement

7
EFFECTS ON TYPES OF INVESTORS

• Foreign Investors
• Loss of the good foreign investors so actively
  promoted
• Attraction of those who can work the system
• Informal Sector
• Raised hurdles for compliance
• These costs are as important as taxes
• Domestic Formal Private Sector
• Bears brunt of regulations and taxes

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Senegal Le Parcours de l Investisseur 
Ministère de l Environnement
Ministère de l Industrie
Inspection du Travail
Statistiques du Travail
Sonatel
Senelec
ONAS/SDE
Direction Commerce Extérieur
BREP/ Douanes
Douanes
SGS
Bureau des Etablissements Classés
IPRES
Arrêté dautorisation
Titre d  exonération
Dossier
Demande
Carte Importateur- Exportateur
Attestation de vérification
Dossier de Dédouanement
Demande
Demande
Déclaration du mouvement du travailleur
CSS
Présidence
Guichet Unique
Agrément au Code des Investissements, Entreprise
Franche
Travaux Publics
Avis Technique
Services d Hygiène

• L Investisseur
• prépare 23 dossiers différent
• passe par 31 services de l administration
  (dont 6 plusieurs fois)
• passe neuf a vingt-quatre mois pour finaliser
  ces procédures.

Protection Civile
Notaire (Privé)
Elaboration des Statuts de Société
Domaines
Service Régional de lUrbanisme
Centre des Impôts
Enregistrement des Statuts de Société
Dossier/Permis de Construction
Déclaration de Conformité
Commission de Contrôle
Tribunal du Commerce
Cadastre
Enregistrement des Statuts
Registre du Commerce
Direction des Domaines
Demande de terrain
Prévision et Statistique
NINEA
Direction de lIndustrie
Attestation Industriel
Centre des Impôts
Numéro Compte Contribuable
Institution de Prévoyance Maladie
NITI
Adhésion
Déclaration Investissement Etranger
Enregistrement Propriété Intellectuel
Carte d Identité
Déclaration d Ouverture
Affiliation
Affiliation
Centre des Formalités des Entreprises
Inspection Régionale du Travail
Caisse de Sécurité Sociale
IPRES
Ministère de l Economie, Finance, Plan
Organisation Africaine de la Propriété
Intellectuel
Ministère de l Intérieur
Direction de lIndustrie
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GENERAL APPROVALS

• Complex investment codes, incentive schemes, and
  approval requirements
• Company registration formalities and delays
• Tax registration
• Immigration permits
• Business licenses
• Other registrations

10
SECTORAL APPROVALS

• Natural resource exploitation or concessions
• Regulated sectors
• Entry restriction used as main policy tool
• Restrictions on foreign participation
• Quality control and sectoral management (tourism)
• Ineffective resource management record
• Restriction of competition

11
ACCESS TO LAND AND SITE DEVELOPMENT

• Greatest source of delays and frustration
• Access to land
• Delays in identifying and securing government
  land
• Delays in title transfer
• Lack of capacity
• Decentralization
• Site development
• Duplicative review and permitting
• Lack of published standards
• Circumvention, especially at local levels

12
UTILITIES

• Delays in service extension
• Lack of capacity
• Priority to government
• Companies pay full costs of extension
• No compensation
• High costs
• Poor service provision
• Cutoffs and brownouts
• Limited alternatives available
• Lack of serviced land or industrial estates
• Privatization is bringing results

13
OPERATIONAL REQUIREMENTS

• Foreign exchange controls
• Hangovers despite liberalization
• Most current account transactions freed
• Labor, health and safety regulations
• Duplicative reporting requirements
• Duplication of workplace safety oversight
• Liberalization has ended most direct controls
• Import-export procedures
• Customs and Port administrations
• Corruption and arbitrary enforcement
• Import licensing maintained

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TYPES OF CONSTRAINTS ENCOUNTERED

• Poor policy formulation
• Investment codes and sectoral licensing
• Policies reformed, procedures remain
• Trade licenses
• Poor procedures
• Construction permits and approvals
• Ineffective bureaucracies
• Lack of capacity
• Undermined by corruption
• Lack of coordination
• Systemic issues
• Land
• Public utilities

15
WORKSHOPS AND DISSEMINATION

• Public forum, broad participation
• Presentation of results
• Validation by private sector
• Defense by public sector
• Generation of publicity
• Consensus on certain immediate actions
• Gauge interest of agencies in reform
• Venue and vehicle for implementation and
  follow-up

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IMPLEMENTATION

• Mode has varied widely across countries
• Requires high level political support
• Direct participation of line agencies
• Task force with regular monitoring and defined
  time frame
• Pilot projects
• Competition among agencies
• External financial and technical support
• Difficult to structure policy conditionality

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SOME RESULTS

• Institutional approaches
• Ghana Gateway Secretariat pushed reduction of
  import clearance time from 2 weeks to 3 days
• Streamlining
• Tanzania reduction of delays in immigration
  permits from 6 months to 2 weeks
• Capacity Building
• Resources to registrars in Namibia and Uganda
• Policy Reform
• Galvanized support for reform in Senegal
• Customer service approaches
• Windhoek investors window

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SOME CONCLUSIONS

• Effective at getting government to focus on
  investment climate issues
• Pragmatic focus and big picture
• Generates positive publicity for reform
• Timing and politics matter need entry point
• Need to force collaboration from above
• Always some agencies interested in approach
• Use resources as reward for participation
• Impact of process re-engineering
• Ideas for reforms come from mid-level bureaucrats
• But beware the strength of bureaucratic
  intransigence

19
Senegal Le Parcours de l Investisseur 
Ministère de l Environnement
Ministère de l Industrie
Inspection du Travail
Statistiques du Travail
Sonatel
Senelec
ONAS/SDE
Direction Commerce Extérieur
BREP/ Douanes
Douanes
SGS
Bureau des Etablissements Classés
IPRES
Arrêté dautorisation
Titre d  exonération
Dossier
Demande
Carte Importateur- Exportateur
Attestation de vérification
Dossier de Dédouanement
Demande
Demande
Déclaration du mouvement du travailleur
CSS
Présidence
Guichet Unique
Agrément au Code des Investissements, Entreprise
Franche
Travaux Publics
Avis Technique
Services d Hygiène

• L Investisseur
• prépare 23 dossiers différent
• passe par 31 services de l administration
  (dont 6 plusieurs fois)
• passe neuf a vingt-quatre mois pour finaliser
  ces procédures.

Protection Civile
Notaire (Privé)
Elaboration des Statuts de Société
Domaines
Service Régional de lUrbanisme
Centre des Impôts
Enregistrement des Statuts de Société
Dossier/Permis de Construction
Déclaration de Conformité
Commission de Contrôle
Tribunal du Commerce
Cadastre
Enregistrement des Statuts
Registre du Commerce
Direction des Domaines
Demande de terrain
Prévision et Statistique
NINEA
Direction de lIndustrie
Attestation Industriel
Centre des Impôts
Numéro Compte Contribuable
Institution de Prévoyance Maladie
NITI
Adhésion
Déclaration Investissement Etranger
Enregistrement Propriété Intellectuel
Carte d Identité
Déclaration d Ouverture
Affiliation
Affiliation
Centre des Formalités des Entreprises
Inspection Régionale du Travail
Caisse de Sécurité Sociale
IPRES
Ministère de l Economie, Finance, Plan
Organisation Africaine de la Propriété
Intellectuel
Ministère de l Intérieur
Direction de lIndustrie